Ladybird Living – Your London Estate Agent
Changes landlords and letting agents should consider in April 2024
As of April 2nd, 2024, the new tax year commences, bringing forth alterations in the VAT threshold and Capital Gains Tax. Here’s what landlords and letting agents should be aware of.
Key Points for April 2024:
- Local Housing Allowance
- Reduction in Capital Gains Tax
- VAT Registration Threshold
- Advancements in the Leasehold and Freehold Bill
Housing Benefit Adjustments: The Local Housing Allowance (LHA) serves as the basis for determining housing benefits for tenants renting from private landlords. Regulated by the Department for Work and Pensions, the LHA is calculated based on prevailing market rents within a Broad Rental Market Area (BRMA).
Starting April 2024, the government intends to augment the LHA, offering support to some of the most financially vulnerable families receiving universal credit or housing benefits. This adjustment could result in an annual increase of approximately £800. The specific amount of LHA varies depending on the property’s location, and detailed rates can be accessed by postcode or local authority.
Capital Gains Tax Reduction: Effective from April 6, 2024, landlords holding properties under their name will experience a reduction in Capital Gains Tax liabilities.
Capital Gains Tax is levied on profits generated from the sale of properties other than one’s primary residence. This encompasses sales of buy-to-let properties, business premises, land, and inherited assets. As outlined in the Spring Budget, the tax rate will decrease from 28% to 24%. Consequently, landlords looking to divest their properties will face a lower tax burden.
Key Adjustments in VAT Threshold: While residential properties are exempt from Value Added Tax (VAT), landlords operating holiday accommodations and short-term lets may be impacted by changes in the VAT registration threshold.
As disclosed in this year’s Spring Budget, the VAT threshold will be raised from £85,000 annually to £90,000, effective April 1, 2024. Consequently, landlords earning below the new threshold of £90,000 will be exempt from VAT registration, allowing them to retain more earnings without taxation.
Advancement of the Leasehold and Freehold Bill: Scheduled to proceed to the committee stage in April, the Leasehold and Freehold Bill has stirred significant controversy within the private rental sector since its unveiling in November 2023.
Following a consultation in March 2024, there were indications that Michael Gove, Secretary of State for Levelling Up, Housing and Communities, might consider abolishing the introduction of “peppercorn” rates, a critical component of the Leasehold and Freehold Bill. The committee stage aims to address current issues regarding ground rents and enhance transparency in future service charges.
The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances.
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