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Spring Budget 2024: Property Industry Updates

The Spring Budget 2024 statement on the 6th of March saw Chancellor Jeremy Hunt announce a range of changes for the Property and Housing Industry, especially surrounding taxation. From amendments to Stamp Duty Land Tax (SDLT) regulations to reforms in Capital Gains Tax (CGT) and the non-dom tax regime, these adjustments carry significant implications for property investors, developers, landlords, and prospective homeowners alike.

In this article, we'll delve into the key updates unveiled in the Spring Budget and explore their potential impacts on the property industry.

Changes to Stamp Duty

There have been a few changes announced around Stamp Duty Land Tax (SDLT), which is the tax paid when purchasing property or land in England and Northern Ireland. These changes took effect on the 6th of March 2024.

The first change has introduced legislation to update outdated references and definitions within SDLT laws concerning registered social landlords. The changes eliminate public bodies from being subject to the usual SDLT 15% higher rate charge when acquiring residential properties valued over £500,000.

The regulations surrounding the eligibility for First-time Buyers’ Relief from SDLT have also been adjusted to allow individuals purchasing new leases through nominee or bare trust arrangements to claim the relief. It seems as though this change is to support victims of domestic abuse who use these arrangements to conceal their new address from former partners, as previously, they couldn’t claim relief.

No More Multiple Dwellings Relief

Until now, the Multiple Dwellings Relief (MDR) from the SDLT has been available when multiple residential properties are purchased in a single translation. This relief has been especially advantageous for investors or developers acquiring multiple properties.

This relief will be no more, however, the Spring Budget announced the plan to abolish it entirely. Transactions with contracts exchanged on or before the 6th of March 2024, will retain the benefit of the relief irrespective of their completion date, as will any other purchases finalised before June 1, 2024. Certain exclusions apply - for example, you’ll lose the relief if changes to the contract are made after the specified date.

The buy-to-let sector was hoping, instead, for more support from the government - there are now questions about the impact this could have on the sector and those who rent, as well as landlords.

Reduction in Capital Gains Tax

Capital gains tax is a tax on the profit made when you sell or dispose of an asset that has increased in value. This applies to things like additional properties, shares, business assets, and personal assets worth more than £6000 (excluding cars). 

The amount of capital gains tax you pay depends on things like your income, the type of asset, plus any tax-free allowances you may be eligible for. The lower rate for gains on residential property is staying at 18%, but the current higher rate of 28% will reduce to 24% from the 6th of April 2024. The hope here is that the lower rate “will encourage landlords and second home-owners to sell their properties, making more available for a variety of buyers including those looking to get on the housing ladder for the first time.” Only time will tell whether this has the desired impact.

No More Furnished Holiday Lettings Tax Advantages

At the moment, landlords letting out furnished holiday homes have access to a range of tax advantages and reliefs under the Furnished Holiday Lettings tax regime. These include:

• Subtracting the entire expense of their mortgage interest payments from their rental income, meaning tax is only due on the net proceeds
• Receiving capital allowances on furniture and fittings
• Paying reduced Capital Gains Tax when selling their furnished holiday lets
• Receiving CGT rollover relief

From April 2025, the regime will be abolished, meaning furnished holiday let landlords will no longer have access to the above advantages. Around 127,000 properties currently use this regime, which the Chancellor claims has created “a distortion, meaning there are not enough properties available for long-term rental by local people.” 

The Government’s aim here is to level the playing field for both short-term holiday lets and long-term residential lets to reduce the attractiveness of furnished holiday-let investments, and thus expand the stock of houses available to rent. This will certainly impact the holiday let sector, especially in high-tourism areas.

Non-dom Tax Status Abolished

Non-domiciled individuals are those who are not permanently domiciled in the UK, meaning their permanent home is outside of the UK.

If you’re a non-dom individual, then under the non-dom tax regime you have the option to be taxed on either your UK income and gains (the "remittance basis") or on your worldwide income and gains, like UK domiciled individuals. 

Choosing the remittance basis means you are only taxed on income and gains that are brought into the UK. Individuals who have been resident in the UK for a certain number of years may be subject to the remittance basis charge, which is an additional tax payable to access the remittance basis.

However, the reform announced in the Spring Budget eliminates preferential tax treatment based on domicile status for all new foreign income and gains (FIG) from April 2025. It replaces the remittance basis of taxation with the view to make the whole system much simpler and fairer.

Once everything is in place, people who have been tax resident in the UK for more than 4 years will be liable to pay UK tax on any newly arising FIG, aligning them with other UK residents. This updated regime is more generous compared to countries without an equivalent scheme and remains competitive against countries with similar systems for new residents.

Final Thoughts

The Spring Budget has brought significant changes to the property industry, particularly in the realm of taxation. The adjustments to Stamp Duty Land Tax (SDLT) have aimed to modernise regulations and provide relief to certain groups. In contrast, the abolition of Multiple Dwellings Relief (MDR) may pose challenges for investors and developers, raising concerns about its impact on the rental sector.

The reduction in Capital Gains Tax (CGT) rates intends to stimulate property sales, potentially increasing housing availability. The elimination of tax advantages for furnished holiday lettings aims to address distortions in the market to further increase the year-round housing stock, particularly in high tourism areas.

The overhaul of the non-dom tax regime seeks to simplify and create fairness in taxation, aligning the treatment of foreign income and gains with that of UK residents. These changes aim to encourage investment and spending within the UK while maintaining competitiveness internationally.

The Spring Budget 2024 seeks to address market distortions and aims to encourage supply in the residential property sector, ultimately shaping a landscape poised for both challenges and opportunities in the years ahead.

At Quay Living, we are proud to offer the most comprehensive residential sales and lettings service in Poole. Our local knowledge and expertise sets us apart from the rest: you name it, we can help.

Whether you’re selling or buying, letting or renting, feel free to contact our Poole estate agents to get the ball rolling. We look forward to hearing from you!