How will the Spring Budget impact property owners?
The Chancellor delivered his 2024 Spring Budget on 6 March, presenting a ‘Budget for long-term growth’ in the face of an upcoming general election.
Changes to how certain properties are taxed could have a significant impact on owners, including those of residential and holiday properties – and could leave some property owners seeking to sell up.
We’ve covered some of the most significant changes so that Residential Property and Conveyancing teams can stay prepared for changes in the property market.
Capital Gain Tax
From 6 April 2024, higher rate taxpayers will be subject to a lower rate of Capital Gains Tax (CGT) on residential properties.
Currently, gains made on the sale of residential properties are subject to a special rate of CGT of 28 per cent for those who pay tax at the higher rate (with an income of £50,271 or more).
The Chancellor’s new measure will bring this rate down to 24 per cent, with the basic rate unchanged at 18 per cent.
The aim of this policy is to encourage and incentivise disposals of second homes and buy-to-let properties and enhance the residential property market for homebuyers.
Combined with stabilising inflation and interest rates (which, although still high, are no longer rapidly rising), this measure may prompt an increase in house sales, particularly for properties where value has risen quickly.
Multiple Dwellings Relief
A key relief for Stamp Duty Land Tax (SDLT) has been abolished in the Spring Budget.
Multiple Dwellings Relief (MDR) will cease on 1 June 2024. This means that anyone purchasing two or more properties in a single or linked transaction will no longer be eligible for SDLT relief on this basis.
The Chancellor said that little benefit has come from MDR under its original goal of reducing barriers to investment in residential and rental properties.
This is an important update for those in more complex residential property transactions where legal compliance is particularly essential.
Furnished Holiday Lets tax regime
Following consultations with a number of MPs from key constituencies, the Chancellor outlined the abolition of the Furnished Holiday Lets (FHL) tax regime.
The measure comes as those in holiday hotspots raise concerns over the supply of residential homes in areas such as Devon, Cornwall and the Southeast coast.
Previously, owners of qualifying properties were eligible to be taxed under special rules which carried significant tax advantages, including:
- Plant and machinery allowances on items of fixtures, furniture, furnishings and equipment, including annual investment allowance and Full Expensing
- CGT benefits such as Business Asset Rollover or Disposal Reliefs
- Profits counted as earnings for pension purposes
From 6 April 2025, the FHL scheme will be abolished.
The implications for holiday let owners could be wide ranging, including making owning a holiday let financially unviable for those without significant reserves to cover additional costs.
In collaboration with a lower level of CGT for higher rate taxpayers, the Chancellor hopes to encourage early disposal of holiday homes or second properties and therefore enhance the housing market in local areas.
New property tax measures highlight the need for conducting legal due diligence and going through the conveyancing process with both eyes open.
For more advice on the implications of property tax changes for the legal sector, please get in touch with our team today and find out how we can help you.