Transcript

The Budget · STR Unpacked

Ben: Good morning and welcome to your short-term rental bulletin on the 29th of October. So for those in the UK will know exactly what I'm talking about but for people outside of the UK yesterday we had what we call the budget. This is the annual spending plan for the government is where we see new schemes, new plans, cuts and changes announced in one go the plan for a year. This one was particularly important because we've just had a new government come in place and many would grab this budget as the first really important test of this government. So what does it mean for our industry? So I think the first thing to really point out is the budget never used the words short-term let, but it still puts four points on your tax rate. So from the 6th of April, 2027, property income gets its own rate of income tax separate from the main rates for the first time. The property basic rate will be 24 % and the higher rate 44%. and the additional rate 49%. So today's property income is charged at the main rates 20, 40 and 45%. And those main rates are not moving. Last year's budget announced two points and yesterday's added two more and both start on the same day. So on the 6th of April, 2027, it goes 20 to 24, 40 to 44 and 45 to 49 in one step. The Treasury cost the two halves separately at £575 million and £590 million. So the full step peaks somewhere near £1.2 billion a year. And it's important to point out that this is our income because Finance Act 2025 abolished the furnished holiday lettings rules from 2025 to 2026 tax year. So check which side of the line you sit on because it is suddenly worth four points and these rates hit a property business if your model carries substantial services and is genuine trade. Your profits are not property income and you stay at 20, 40 and 45. The Treasuries costing says the measure reaches unincorporated landlords. So units held inside a company are outside it, which is important to point out for our space. Now, two things cut the other way. First buried in the costing document rather than the budget, finance cost relief stays aligned to the property basic rate and that rate goes to 24%. So mortgage interest relief rises four points on the very same day. If you are geared, model both legs. Second, the threshold for 100 % small business tax relief rises from £12,000 to £18,000 a year for retail, hospitality and leisure property in England from April 2027. The words self catering appear nowhere in this budget. So whether rated holiday units qualify is a question that the association should put in writing, but it is worth pointing out they may already have an answer to this. So please do check with your association. The budget never named us and still moved the rate on our income and the relief underneath it. So model both legs. April, 2027 is only 159 days away. Thank you for watching and I'll see you tomorrow.