Changes to income and Capital Gains Tax (CGT) that came in over the weekend could mean reduced investment in the PRS, warns an insurance expert.

Following Jeremy Hunt's Spring Budget (pictured), the higher rate of CGT for residential property gains has been cut from 28% to 24% while the tax-free personal allowance for CGT has halved from £6,000 to £3,000 per year. Rather than increasing yearly in line with inflation, the Income Tax personal allowance remains frozen at £12,570 until 2027.

Matthew Harwood, home and lifestyle expert at Confused.com home insurance, says additional costs involved in selling property may make it less appealing for people to invest and become landlords.

“Reduced income for tenants and landlords may mean less money is invested in insurance premiums by both parties,” explains Harwood.

“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.”

Abolished

The compulsory Class 2 National Insurance charge for self-employed taxpayers (currently set at £3.45 a week) has been abolished, while the cost of Class 4 contributions has dropped from 9% to 8%, meaning that landlords will keep more of their income. This could have knock-on benefits for renters as well, adds Harwood, as landlords who benefit from these tax changes could decide to invest more in 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,” he says.

Other tax changes include the end to the furnished holiday lettings tax regime and abolition of Multiple Dwellings Relief, which comes into effect for transactions with an effective date on or after 1st June. It can still be claimed for contracts which are exchanged on or before 6th March.