From a property tax perspective, there were three main changes of note as outlined below.
Firstly, furnished holiday letting regime is to be abolished from April 2025. The government has announced that draft legislation will be published in due course, including an anti-forestalling rules to prevent the obtaining of a tax advantage through the use of unconditional contracts. Qualifying furnished holiday lettings have historically benefited from a number of tax advantages compared to standard residential letting business in particular full relief on interest costs, capital allowances and the availability of business asset disposal relief (10% CGT rate). The restriction on the deductibility of the interest costs to effectively only a 20% tax credit going forward, is likely to be the most acutely felt by such businesses. Unlike when interest restrictions were introduced for buy to let individual landlords, there appear to be no phasing in of the interest restriction rules over a number of years. This timeline therefore provide landlords little time to assess the impact of these changes and restructure their business accordingly. Affected landlords will also need to consider if they change their commercial model, for example to longer term tenants, whether this will also have knock on impacts on other areas of tax such as inheritance tax reliefs.
Secondly, the higher rate of CGT that applies on residential property will be reduced from 28% to 24% for higher rate tax payers. This change will apply from 6 April 2024. For forthcoming disposals, consideration will need to be made on the interplay of the reducing CGT annual exemption, which is currently £6,000 up to April 2024 but will be £3,000 from April 2025.
Thirdly, it was announced that multiple dwellings relief will be abolished for SDLT purposes for all transactions with an effective date of 1 June 2024 onwards. For purchasers who have exchanged contracts on or before 6 March 2024, they will remain eligible for the relief, regardless of when the transaction completes, provided that there is no variation of the contract. Broadly, this relief is currently available where two or more dwellings are acquired under the same or a linked transaction. Given that HMRC announced a consultation into this relief back in February 2022, the writing has been on the wall for a while in respect of this relief. Although the expectation was that it would be reformed for example restricted to business use assets rather than abolished outright. Interestingly, HMRC have decided not to consider reforming the mixed use rules, which was within the same consultation as multiple dwellings relief. The mixed rules will continue to apply where the land interest acquired (and any associated linked land transactions) are not entirely residential such that the taxpayer pays SDLT at the non-residential rates.
Finally, there were some minor alterations made to SDLT first time buyers relief, where nominees are used and in relating to the public subsidiary definition for SDLT’s registered social landlord exemption. Both of these were welcome and removed unexpected anomalies.
Home >Articles > Spring Budget 2024: Property tax perspective
Spring Budget 2024: Property tax perspective
From a property tax perspective, there were three main changes of note as outlined below.
Firstly, furnished holiday letting regime is to be abolished from April 2025. The government has announced that draft legislation will be published in due course, including an anti-forestalling rules to prevent the obtaining of a tax advantage through the use of unconditional contracts. Qualifying furnished holiday lettings have historically benefited from a number of tax advantages compared to standard residential letting business in particular full relief on interest costs, capital allowances and the availability of business asset disposal relief (10% CGT rate). The restriction on the deductibility of the interest costs to effectively only a 20% tax credit going forward, is likely to be the most acutely felt by such businesses. Unlike when interest restrictions were introduced for buy to let individual landlords, there appear to be no phasing in of the interest restriction rules over a number of years. This timeline therefore provide landlords little time to assess the impact of these changes and restructure their business accordingly. Affected landlords will also need to consider if they change their commercial model, for example to longer term tenants, whether this will also have knock on impacts on other areas of tax such as inheritance tax reliefs.
Secondly, the higher rate of CGT that applies on residential property will be reduced from 28% to 24% for higher rate tax payers. This change will apply from 6 April 2024. For forthcoming disposals, consideration will need to be made on the interplay of the reducing CGT annual exemption, which is currently £6,000 up to April 2024 but will be £3,000 from April 2025.
Thirdly, it was announced that multiple dwellings relief will be abolished for SDLT purposes for all transactions with an effective date of 1 June 2024 onwards. For purchasers who have exchanged contracts on or before 6 March 2024, they will remain eligible for the relief, regardless of when the transaction completes, provided that there is no variation of the contract. Broadly, this relief is currently available where two or more dwellings are acquired under the same or a linked transaction. Given that HMRC announced a consultation into this relief back in February 2022, the writing has been on the wall for a while in respect of this relief. Although the expectation was that it would be reformed for example restricted to business use assets rather than abolished outright. Interestingly, HMRC have decided not to consider reforming the mixed use rules, which was within the same consultation as multiple dwellings relief. The mixed rules will continue to apply where the land interest acquired (and any associated linked land transactions) are not entirely residential such that the taxpayer pays SDLT at the non-residential rates.
Finally, there were some minor alterations made to SDLT first time buyers relief, where nominees are used and in relating to the public subsidiary definition for SDLT’s registered social landlord exemption. Both of these were welcome and removed unexpected anomalies.
