With several tax changes taking effect in April, experts reveal what this will mean for renters and landlords – including how these changes may impact property insurance in the future.

Matthew Harwood, home and lifestyle expert at Confused.com home insurance, said:

National Insurance charges

“Firstly, the compulsory Class 2 National Insurance charge for self-employed taxpayers (currently set at £3.45 a week) will be abolished starting April 2024. In addition, the cost of Class 4 contributions will drop by a percentage from 9% to 8%. These changes mean that landlords will keep more of their income.

“This could have knock-on benefits for renters as well. Landlords who benefit from these tax changes may decide to invest more in their property maintenance and insurance coverage. Renters may benefit from lower tenant insurance premiums due to any improvement in the condition and insurance protection of the building.

“In addition, Class 1 National Insurance contributions are set to be reduced by 2%, from 10% to 8%. If you’re employed, you pay Class 1 National Insurance contributions. This means more disposable income for renters who are salaried employees, offering some financial relief during the cost of living crisis.

Capital Gains Tax

“The tax-free personal allowance for Capital Gains Tax is set to halve from April, falling from £6,000 to £3,000 per year. However, the Capital Gains Tax rate is not changing. For basic rate taxpayers, it’s still 18% for property sales. For higher-rate taxpayers, it’s still 28%.

“These additional costs involved in selling property may make it less appealing for people to invest in property and become landlords. This could mean less choice for renters and a smaller market for insurance policies.

Income Tax

“Rather than increasing yearly in line with inflation, the Income Tax personal allowance will remain frozen at £12,570. It will stay frozen until 2027. As your income increases, you’ll pay tax on more of it.

“Reduced income for tenants and landlords may mean less money is invested in insurance premiums by both parties. This potentially leaves rented properties at a greater risk of being underinsured. It also means that tenants and landlords may be left to foot the bill if their property or possessions are damaged.

“Reduced income for landlords may also mean less money is invested in rental properties. This could negatively affect the property’s condition, meaning a greater risk of issues and claims and higher insurance premiums for both renters and landlords.

“However, the government is also considering introducing the Decent Homes Standard to private properties. This means landlords will be legally required to ensure their homes meet a certain standard, which should prevent this issue.

“Overall, it is unclear exactly what the impact of tax changes will be for tenants and landlords due to the different elements being introduced at once. Any increased financial pressure on tenants and landlords makes shopping around and getting the best deal even more important. You can find the best insurance policy for you while ensuring the right coverage level.

“For more information on what insurance covers in rented properties, you can read the following guides: Confused.com tenant insurance and Confused.com landlord insurance. You can also learn more about the upcoming tax changes on the government website.”

Leave a Reply