Spring 2024 Budget

Spring 2024 Budget

Chancellor Jeremy Hunt, last week, unveiled his Budget which contained various announcements that could have a direct impact on individuals who own property, including landlords and investors. The main property-related points have been outlined, but it is recommended that you consult your tax advisor to fully understand how these changes may affect you personally.

Reduction in Capital Gains Tax on residential property

From 6 April 2024 the higher rate of Capital Gains Tax for residential property sales will be cut from 28% to 24%, which will benefit owners of second homes and investment portfolios looking to sell. 

The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. Private Residence Relief will continue to apply, meaning the vast majority of residential property sales will incur no Capital Gains Tax.

We anticipate that this reduction in Capital Gains Tax rates will encourage some owners of second homes or property portfolios to liquidate their ‘surplus’ property assets, especially if they had already started planning to sell. This is likely to bring more properties back into the market but we don’t foresee that it will have a material impact on property prices.

Furnished Holiday Lettings tax

From 6 April 2025 tax relief for Furnished Holiday Lettings will be abolished and short-term and long-term rental properties will be treated the same for tax purposes.

This means that owners of holiday lets will no longer have the option to deduct the entire expense of their mortgage interest payments from their rental income. Additionally, they will not be eligible for capital allowances on furnishings, nor will they benefit from discounted capital gains tax rates upon sale, or Capital Gains Tax rollover relief.

This move has been designed by the Government to address concerns about the impact of short-term holiday lets on local communities, housing availability and rental prices in tourist hotspots such as London, where over 60,000 properties are currently being marketed as holiday lets. 

By removing tax benefits on these holiday lets, the Chancellor has purposefully created an environment that could encourage some landlords to sell their properties or revert back to more traditional long-term lettings, providing a boost for the housing market and overall supply. 

Although relatively unlikely, if there were to be an influx of new rental properties coming onto the market, rental prices would dip in the short to medium term, especially given the rising number of available rental properties already on the market at this time.

Multiple Dwellings Relief

From 1 June 2024, the government is abolishing Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty Land Tax regime.

Introduced in 2011, Multiple Dwellings Relief reduced the cost of stamp duty when investors bought more than one residential property as a single transaction or as linked transactions. Rather than calculate the stamp duty due on the total price being paid for all the properties, an average value is taken of all the properties involved. For example, if someone were to buy four buy-to-let properties for a combined sum of £2 million, the stamp duty due would be just £110,000 with Multiple Dwellings Relief compared to £211,250 without it.

In theory, the removal of Multiple Dwellings Relief represents a sizeable increase in transaction costs for investors. However, an external evaluation showed that there was no strong evidence the relief has met its original objective of supporting investment in the private rented sector. As a result we don’t foresee this greatly changing investor appetite.

New tax regime for non-doms
From April next year, the amount of time that foreign nationals (non-doms) can live in the UK and not have their overseas-generated income taxed under UK tax rules will be cut from 15 years to just 4. The Government is also consulting on moving Inheritance Tax from the current domicile-based system to a residency-based system. It is thought that overseas assets placed in trusts before April 6th 2025 will be exempt.

As this represents a significant change for non-doms, the Government has confirmed that a number of transitional arrangements will be made available which could present a short window of opportunity for non-doms who wish to bring funds to the UK to do so in a more efficient manner:

- Existing non-doms claiming the remittance basis will include an option to rebase the value of capital assets to 5 April 2019.

- There will be a temporary 50% exemption for the taxation of foreign income for the first year of the new regime (2025-26).

- The government will also offer a two-year Temporary Repatriation Facility for individuals who have paid tax on the remittance basis prior to 6 April 2025 to bring previously accrued foreign income and gains into the UK at a 12% rate of tax.

The proposed 1% mortgage deposit scheme
There was expectation in some quarters that a 1% mortgage deposit scheme may be introduced to help first-time buyers, however there was no mention of this in the Budget, meaning it is off the table for the time being.