Although change has become the norm for landlords, 2024 promises to be a year of even more change when various strands of housing policy will come into probably enter the statute book as new laws and regulations. There are also a few important developments on the tax and financial side that may impact landlords.
What’s more, the “working assumption” of Rishi Sunak is that the General Election will take place in the second half of the year. This means we’ll be in for even more change if we have a new government by the end of the year.
This is a guide to 7 changes for landlords to be ready for in 2024.
7 changes for landlords to watch out for in 2024
- 1. Renters Reform Bill: crucial detail to be confirmed in 2024
- 2. Leasehold and Freehold Reform Bill progress
- 3. Last full year of lower stamp duty
- 4. Abolition of pension lifetime allowance from 6 April 2024
- 5. Reduction in tax-free allowance for Capital Gains Tax
- 6. New guidance from the Competition and Markets Authority on letting?
- 7. The coming General Election casts a shadow
1. Renters Reform Bill: crucial detail to be confirmed in 2024
The Renters Reform Bill is likely to hit the statute book and become law in 2024, and it will make profound changes to the way in which landlords let properties to tenants.
However, although the latest draft of the Bill extends to 164 pages, there is still a lot of crucial detail that we are waiting for. Here is a list of the key things that the Government should confirm in 2024, either by further amendments to the Bill or by draft regulations:
- PRS Ombudsman: Although Junior Minister, Jacob Young, announced during the Committee Stage that the new PRS Ombudsman will be the Housing Ombudsman, we have very little detail on how it will operate, or have no information on how much it will cost landlords. See: What we know about the new PRS Ombudsman.
- Decent Homes Standard for the PRS: The Renters Reform Bill includes wording to establish the Decent Homes Standard for the private rented sector. However, the Government has not confirmed the outcome of the 2022 consultation, or what it will look like for private landlords, and how it will be assessed and monitored. See: Renters Reform Bill and the PRS Decent Homes Standard.
- Rented Property Portal: Apart from advising there will be new digital database where each landlord and each “dwelling” will have an entry, and unique identifiers, the Government has said little on how the new Rented Property Portal will work in practice and what documents landlords will need to upload. We do know, however, will be landlords will be subject to rent repayment orders for up to two years’ rent if they provide false or misleading information to the database and for continuing or repeat breaches.
- Section 21: We are still in the dark as to when Section 21 will be abolished, as the Government has not confirmed a timetable for implementing the improvements to the court system that will need to be in place before Section 21 is scrapped. See: What the abolition of Section 21 means for landlords
The Bill has not yet completed its journey through the House of Commons, and then it needs to go through the House of Lords after that. We should expect more amendments and, hopefully, more detail on the above.
>> Related Post: Renters Reform Bill Timetable: What happens when?
>> Related Post: The 10 key changes in the Renters Reform Bill
2. Leasehold and Freehold Reform Bill progress
For the 38% of landlords who own a leasehold property, the Leasehold and Freehold Reform Bill is one commitment from Boris Johnson’s 2019 election manifesto for the Conservative Party that they’ll hope will reach the statute book before the General Election. It will enable leaseholders to extend leases to up to 990 years, abolish marriage value and also limit ground rent. These changes will make it cheaper and easier for leaseholders to extend leases or buy the freehold or share of the freehold.
The Committee Stage started in mid-January, and Michael Gove has previously said that the ban on leasehold houses will be introduced at that stage. We’re waiting for the outcome of the consultation on the restriction of ground rent, which closed on 18 January 2024, although Michael Gove has said his preference is for it to be a peppercorn.
>> Related Post: Practical guide to the Leasehold and Freehold Reform Bill
3. Last full year of lower stamp duty
Amidst the package of announcements made by the then Chancellor Kwasi Kwarteng on 23 September 2022 in his infamous mini budget, was the “permanent” increase of the residential nil-rate tax threshold from £125,000 to £250,000.
However, Jeremy Hunt quietly introduced a sunset clause to this stamp duty reduction in his Autumn Statement on 17 November 2022, so it will now end on 31 March 2025. This means that all buyers will go back to paying the full amount of stamp duty next year.
As with other changes to stamp duty, this may result the surge of transactions by landlords towards the end of 2024 and the beginning of 2025 before the lower stamp duty ends.
>> Useful Resource: What are the rules for calculating stamp duty for landlords?
4. Abolition of pension lifetime allowance from 6 April 2024
One fairly rare bit of good news on the investment side last year was when the government announced that it would abolish the lifetime allowance for pensions (currently £1,073,100) in the Spring Budget 2023. The government started this process by removing the tax charge for exceeding the lifetime allowance from 6 April 2023. The Finance Bill 2024 includes the remaining measures needed to abolish the lifetime allowance from 6 April 2024.
Why is does this matter to landlords? Many landlords draw down up to 25% of their pension tax free to invest in buy to let properties after they reach 55. They’ll still only be able to withdraw a maximum of £368,275 as the plans now stand, ie 25% of the current lifetime allowance. However, it means that they will no longer need to worry about their investments doing so well that they incur a punitive tax.
That said, Rachel Reeves, the Shadow Chancellor, said last year that Labour had plans to revers these changes, and instead limit it to doctors (many of whom have final salary pension schemes that are near or above the cap) for “a fraction of the price.”
5. Reduction in tax-free allowance for Capital Gains Tax
Landlords who own properties in their own name will have a smaller capital gains tax allowance from 6 April 2024. The annual exempt amount will drop from £6,000 to £3,000 in the 2024-25 tax year. This means more capital gains tax will be payable by unincorporated landlords on capital gains. As if Section 24 wasn’t already enough.
The rate at which capital gains tax is charged is not changing, and it depends on which tax bracket you fall into. For basic rate taxpayers, the rate is currently 18% for property sales, and 10% on the sale of other assets, whilst for higher rate taxpayers, it’s 28% for properties, and 20% on other sales.
6. New guidance from the Competition and Markets Authority on letting?
The Competition and Markets Authority has been carrying out a consumer research project into the “rented housing sector”, focusing on ‘zero-deposit’ schemes, sham licences, guarantees. The CMA is due to report in the spring of 2024 and they expect to update their publication Guidance for lettings professionals on consumer protection law, last published in 2014.
The updated guidance is intended to help landlords, tenants, and letting agents to understand their rights and obligations in relation to consumer protection law. Hopefully, it will also provide further clarity about what clauses in contracts between letting agents and landlords are unfair for “consumer landlords”.
>> Related Post: How to terminate the management contract with your letting agent
7. The coming General Election casts a shadow
The Prime Minister confirmed on 4 January that his “working assumption” was that there would be a General Election in the second half of 2024. This means that the pre-election preparations will be ramping up, and the private rented sector is set to be a key issue in the election, not least because of what Shelter terms a “Rent Wall” (as opposed to a “Red Wall”). These are 38 constituencies in “the Conservative heartlands”, mostly in London and the South, where private renters are “set to be decisive at the ballot box”.
The uncertainty arising from the anticipated regime change after so long will cast a shadow over the private rented sector in 2024, particularly as the Labour Party has not yet published its policies for the PRS, EPCs, and taxation.
>> Useful Resource: Where the 4 political parties stand on the private rented sector