Residential Property: Reaction to Spring Budget

Residential Property: Reaction to Spring Budget

With a General Election looming, the Chancellor Jeremy Hunt’s budget sought to lay the groundwork for the government’s re-election, with investment plans put forward for all areas of the economy.

Two key areas of focus for residential property are the abolition of the Multiple Dwellings Relief (MDR), a relief in Stamp Duty for the purchaser of more than one property in a single transaction, and the Furnished Holiday Lettings tax regime. The Chancellor also announced that the higher rate of Capital Gains Tax (CGT) for residential property will be reduced from 28% to 24%.

Multiple Dwellings Relief and Furnished Holiday Lettings

The MDR relief regime is set to be abolished from June this year, which will raise £385million a year according to the government after reportedly showing “no evidence of promoting investment in the private rented sector”.

Meanwhile, scrapping the Furnished Holiday Lettings tax regime from April 2025 will reportedly raise an additional £245million a year. With coastal areas and holiday hotspots facing housing shortages across the country, this has the potential to help local people in those communities get on the housing ladder.

Alice Altounyan, Partner in the Thrings Residential Property team, said: “Following the changes to the tax treatment of buy-to-let properties, it was probably only a matter of time before the favourable tax regime for Furnished Holiday Lets was also scrapped, with the changes to holiday lettings tax and the associated reduction in CGT undoubtedly designed to encourage holiday let owners to sell.

“There is the risk, however, that this could negatively impact investment – starkly contrasting to the narrative in the Budget announcement – given property investors benefit from the existence of MDR to reduce their Stamp Duty Bill. The changes could also potentially stifle diversification for landowners, given holiday lets are a popular option for creating additional income from unused land.

“Our advice to those looking to either buy or sell a substantial property that comes with extra accommodation such as cottages or granny annexes within the grounds is to get moving. With the 1 June deadline in place, we fully expect to see a flurry of activity across the market over the coming months so make sure you aren’t leaving it too late!”

Capital Gains Tax

Also aiming to help people get on the property ladder, the government’s reduction of the top rate from 28% to 24% is expected to incentivise earlier disposals of second homes and buy-to-let properties and will come into force from 6 April this year.

The lower rate of CGT, meanwhile, is unchanged at 18%.

Ben Coulson, Partner in the Thrings Private Client team, added: “This was an unexpected announcement by the Chancellor and only time will tell if this tax cut is significant enough to incentivise second home owners and landlords to sell. Whilst bringing the higher rate band for CGT closer to the rate charged on other investments will, undoubtedly benefit landlords and second home owners, the benefit is diluted by the drop of the personal allowance from £12,300 in 2023 to £3,000 in April 2024.

“An interesting thought arising from this budget is the rate of tax cut, coupled with the abolition of the furnished holiday let regime could incentivise second home owners and landlords to exit the market. Currently, Business Asset Disposal Relief (BADR), is available to owners of furnished property lets that meet certain conditions, and can lower the rate of CGT to 10%. However, it is likely that BADR will not be available after April 2025 and any disposals after that date will be taxed at higher 24% rate.

“One inadvertent effect on the changes could be that on the rental market. With rents and demand at an all-time high, reducing the pool available to renters may have an adverse effect on those unable to get onto the housing ladder.”

Thrings’ Residential Property lawyers are skilled at navigating the rarely straightforward processes that are buying, selling or renting homes and offer professional, open and tailored advice that gives you confidence in making the right decision for you. To find out more about how they can bring clarity to your dealing with the property market, please get in contact.


Thrings Private property lawyers

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