The Chancellor delivered his 2024 ‘Budget for long-term growth’ in the face of an upcoming general election.
Although the headlines have been dominated by the news that employee National Insurance Contributions will be cut further to eight per cent, Mr Hunt also announced several measures, which changed how certain property taxes will be applied.
Largely impacting owners of second or additional homes and Furnished Holiday Lets, the new measures attempt to balance individual tax cuts and bolster The Treasury in other areas.
Capital Gains Tax
From 6 April 2024, higher-rate taxpayers will be subject to a lower rate of Capital Gains Tax (CGT) on the sale or disposal of second or additional residential properties that they own.
Currently, gains made on the sale of these 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.
This policy aims to encourage and incentivise disposals of second homes and buy-to-let properties and enhance the residential property market for homebuyers.
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.
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 South Coast.
Previously, owners of qualifying properties were eligible to be taxed under special rules that carried significant tax advantages, 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.
From 6 April 2025, the FHL scheme will be abolished, ostensibly saving The Treasury around £245 million per year.
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 disposals of holiday homes or second properties, thereby enhancing the housing supply in certain areas.
We understand that changes to property taxes can be complex, so we’re always here to offer advice to those who own property or are considering investing.
For expert, tailored advice, please get in contact with us today.
