The 2024 Spring Budget has shaken up the property sector considerably, with the Chancellor unveiling a “Budget for long-term growth” in anticipation of the upcoming general election.
Amidst the broader fiscal adjustments, a series of strategic shifts in property taxation stand out, particularly affecting second home and Furnished Holiday Let (FHL) owners.
These measures signify a concerted effort to refine the balance between individual tax relief and bolstering Treasury revenues, a move that demands a more nuanced understanding of property legislation from seasoned and novice property stakeholders alike.
Furnished Holiday Lets Tax Regime changes
Following consultations with MPs from several key constituencies, the Chancellor has decided to end the Furnished Holiday Lets (FHL) tax regime.
It puts an end to some significant tax advantages that you may already have been enjoying, including:
- Plant and machinery allowances on items of fixtures, furniture, furnishings and equipment, including the Annual Investment Allowance and Full Expensing
- CGT benefits, such as Business Asset Rollover or Disposal Reliefs
- Profits counted as earnings for pension purposes.
The FHL scheme, and its associated benefits, will end on 6 April 2025.
This could make owning a holiday home untenable for many, especially those who do not have significant reserves to back their investments.
A reassessment of the Multiple Dwellings Relief
The Spring Budget also marks the end of Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax (SDLT), effective from 1 June 2024.
This relief, previously available for transactions involving two or more properties, will no longer apply, removing a key incentive for bulk property acquisitions.
This is likely to be a major disadvantage for those looking to buy properties and might mean a reassessment of your investment strategies.
Capital Gains Tax
A standout announcement is the recalibration of Capital Gains Tax (CGT) for higher-rate taxpayers from 6 April 2024.
This adjustment sees a reduction in the CGT rate from 28 per cent to 24 per cent on sales or disposals of additional residential properties.
The Chancellor aims to stimulate the property market by encouraging the disposal of second homes and buy-to-let properties, a move that could unlock significant opportunities for both investors and homebuyers.
If you were looking to sell your property, it might be prudent to wait until this change comes in to take advantage of the lower rate.
Strategic implications and future directions
These tax reforms underscore a strategic redirection in property tax, with very significant implications for owners of second homes and FHLs.
The Chancellor’s measures aim to stimulate market dynamics, enhance housing availability, and recalibrate the fiscal landscape in favour of sustainable growth but many of his decisions have made the property sector more complex.
For those in the property sector, these changes might mean you need to perform a thorough reassessment of your investment strategies and portfolio structures.
We remain committed to providing expert, tailored advice to help you understand and adapt to these new measures so if you require further information on the tax changes, please reach out.
To explore how these changes might affect your property portfolio and to discuss strategic responses, get in touch with our team.