The 2024 Labour Autumn Budget, presented on October 30, has significant implications for property investors, particularly those in the House in Multiple Occupation (HMO) market. With a focus on wealth redistribution and housing affordability, Labour’s policy changes target both property taxes and landlord responsibilities, affecting costs and operational strategies for HMO owners.
Key Policy Changes and Their Impacts
Capital Gains Tax (CGT) Increases
The Budget includes a review of capital gains tax rates, potentially increasing them to as high as 39% on residential properties. This change is set to impact HMO investors, particularly those looking to sell properties with substantial capital gains. Investors may face much higher tax liabilities on profits, making it essential to reassess financial strategies for long-term property holdings or consider tax-efficient structuring options for their portfolios.
Stamp Duty Adjustments
Labour announced that Stamp Duty thresholds will revert to previous levels from April 2025, impacting property purchases. Specifically, the first-time buyer threshold will fall to £300,000, and for other buyers, it will revert to £125,000. Additionally, the surcharge for non-UK residents will increase from 2% to 3%, which could affect overseas investors in the UK HMO market. Higher costs for new acquisitions may reduce the appeal of expanding HMO portfolios in the near term.
Energy Efficiency and EPC Regulations
The government will expand its energy efficiency programs, with a goal that all rental properties meet a minimum EPC rating of C by 2030. This shift is in line with Labour’s “Warm Homes Plan,” offering grants for landlords to upgrade properties to be more energy-efficient. However, compliance will require HMO landlords to invest in property improvements, potentially increasing short-term expenses. New incentives and tax reliefs on energy efficiency improvements could alleviate some of the upfront costs but will require planning.
Abolition of the Non-Domicile Tax Status
Starting in April 2025, Labour will remove the non-domicile tax status, impacting high-net-worth individuals who often invest in UK property. This measure aims to curb tax avoidance and could reduce foreign investment in the property sector, potentially affecting HMO landlords who rely on overseas financing or partnerships.
Local Housebuilding Mandates and Market Supply
Labour has reintroduced mandatory housing targets for local councils, expecting to increase property supply over time. This policy aims to address the housing shortage but could exert downward pressure on property values if supply significantly outpaces demand, particularly in areas with high HMO density. HMO investors may see reduced asset appreciation in some markets if supply increases substantially.
Strategic Considerations for HMO Investors
HMO investors should consider these Budget implications carefully, especially in light of the higher CGT and Stamp Duty rates that may affect acquisition and exit strategies. Additionally, planning for energy efficiency improvements will be essential to meet regulatory standards and avoid penalties. Staying informed on evolving tax policies and local property market conditions will be crucial for maintaining profitability and adaptability in the face of these new fiscal measures.
