Despite hopes that the Budget would see the Chancellor announce measures to stimulate the building of new homes and much-needed help for first-time buyers, the announcements will be a disappointment for many. Hopes for measures to reduce Stamp Duty Land Tax (‘SDLT’) and measures supporting first-time buyers failed to feature.
Instead, announcements targeting the viability of short-term holiday lets and the withdrawal of the SDLT relief will leave many landlords feeling under fire and likely reviewing the ongoing viability of their involvement in the sector.
In terms of the key announcements:
CGT on residential investment property
In a measure that seems intended to drive an increase in the number of properties being brought to the market, with a resultant increase in Capital Gains Tax revenues from the taxation of disposals, from 6 April 2024 the higher rate of Capital Gains Tax for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band. While the cut in rates will be good news for some, it may be scant comfort for landlords being driven out of the sector due to the restrictions applying to relief for interest expenses.
Abolition of the Furnished Holiday Let (‘FHL’) regime
The FHL tax regime is advantageous compared to that which applies to more usual buy-to-let investment properties, including full relief for mortgage interest, capital allowances on white goods and furniture, and more generous rates of CGT on sale.
The abolition of the FHL regime with effect from 6 April 2025 will hit many landlords hard. Restricting relief for mortgage expenses may, in many cases, make an ongoing involvement in the sector non-viable. The costs of exiting may now be significantly higher for those deciding to leave the sector after 6 April 2025, where disposals are caught by the higher rates of CGT on residential property after that date.
Abolition of MDR
From 1 June 2024, Multiple Dwellings Relief, a bulk purchase relief in the SDLT regime in England and Northern Ireland, will be abolished. Property transactions with contracts exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024. The withdrawal of the relief will, however, increase the SDLT costs on many larger real estate transactions going forward.
Business rates
In announcements that will be welcomed by many, the small business multiplier has been frozen for a further year. The 75% relief for the hospitality sector is frozen for another year.
However, changes to tackle rate avoidance and evasion are also being announced, with the Empty Property Relief “reset period” extended from six weeks to 13 weeks from 1 April 2024 in England. The Government will also consult on a “General Anti-Avoidance Rule” for business rates in England and has published a summary of responses to the Business Rates Avoidance and Evasion Consultation in the Spring Budget.
While landlords have come to expect little from the Budget announcements, the reduction in CGT will be welcome for those selling, although the abolition of the Multiple Dwellings Relief will increase costs for buyers. The abolition of the Furnished Holiday Let Regime was announced to increase the availability of homes in Cornwall and similar areas. However, the regime was originally introduced to support the UK tourist industry, so the long-term impacts remain to be seen. While there were some announcements for funding for new homes in the regions, there was little else in the Budget to increase the supply of homes to buy or rent, so the UK’s property supply will continue to be challenging.
To find out more or discuss your individual tax needs, please contact a member of the Tax team on 0333 123 7171.
