In his 2024 “Budget for long-term growth”, announced amidst the anticipation of a forthcoming general election, the Chancellor introduced a series of fiscal measures that looked to reform property taxation.
Buried among the various updates, Mr Hunt unveiled changes to property taxation affecting owners of second homes, additional residential properties, and Furnished Holiday Lets (FHLs) – aiming to achieve a balance between individual tax savings and supplementing the Treasury’s revenues.
Capital Gains Tax adjustments
Effective from 6 April 2024, individuals subject to the higher tax rate will experience a decrease in the Capital Gains Tax (CGT) rate applied to profits from the sale or disposal of second or additional properties.
The current special CGT rate of 28 per cent for higher-rate taxpayers (with an annual income of £50,271 or more) on such properties will reduce to 24 per cent, while the basic rate remains at 18 per cent.
This move seeks to motivate the sale of secondary residential assets, thereby invigorating the property market for purchasers.
Modification to Multiple Dwellings Relief
The Chancellor also announced the termination of Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax (SDLT), effective 1 June 2024.
This change removes SDLT relief for transactions involving the purchase of multiple dwellings, addressing the relief’s limited impact on its initial objective to facilitate investment in residential and rental properties.
Furnished Holiday Lets Tax regime revision
Following discussions with MPs from regions particularly affected, the Chancellor declared the cessation of the FHL tax regime.
This decision responds to concerns over the availability of residential homes in popular vacation destinations such as Devon, Cornwall, and the South Coast.
Until now, the FHL regime offered significant tax benefits, including allowances on plant and machinery, CGT reliefs, and the inclusion of profits as earnings for pension purposes.
With its abolition set for 6 April 2025, projected to save the Treasury approximately £245 million annually, the impact on FHL owners could be substantial, potentially rendering the operation of holiday lets financially challenging without considerable backup funds.
In conjunction with the reduced CGT rate for higher earners, these changes aim to stimulate the early sale of holiday homes and second properties, thus increasing housing availability in targeted locations.
We recognise the complexities surrounding property tax alterations and remain committed to providing expert guidance to property owners and potential investors. For bespoke advice tailored to your needs, please reach out to us today.
