Key takeaways:
- Capital Gains Tax for higher-rate taxpayers on property sales has been reduced from 28% to 24%.
- The furnished holiday lettings tax regime has been abolished.
- The budget also focuses on clean energy and stable energy bills.
The Spring Budget is one of the two yearly updates on the state of the UK economy. It offers the Chancellor of the Exchequer an opportunity to highlight the government’s financial plans and economic projections.
In the latest update on 6 March 2024, the Chancellor gave what is expected to be the final budget presentation from the existing UK government, with a General Election expected to take place before the end of 2024.
Here are the primary insights from the Spring Budget that are crucial for landlords:
Capital Gains Tax Reduction
In the Spring Budget of 2024, the Chancellor announced that the higher rate of capital gains tax on property will be reduced from 28% to 24%.
The capital gains tax is applicable when an individual profits from the sale of a property that isn’t their main residence. For example, selling buy-to-let properties, business premises, land, or inherited properties.
The adjustment in tax policy allows landlords to benefit from capital gains tax relief and include rental income as part of their pension earnings.
BBC’s Business Editor, Simon Jack, expressed surprise at this development. He expressed that the Chancellor expects the reduced tax rates will boost property transactions for increased tax revenues.
Also, the budget saw the elimination of the multiple dwellings relief (MDR), which was designed to encourage investment in multiple residential properties.
The removal of MDR is expected to impact large-scale landlords and the buy-to-let market.
Abolition of Tax Relief on Holiday Lets
The Chancellor has decided to eliminate the furnished holiday lettings tax regime, which helps to support the implementation of personal tax reductions
The change is expected to result in an average financial loss of £2,835 for holiday property landlords. The Chancellor also suggests that this measure is focused on addressing the issue of insufficient rental properties available for residents.
Holiday rentals have become common in certain areas of England and Wales. In 2023, the Welsh Government introduced a new licensing system for holiday lettings. It requires all tourist accommodations to fulfill specific criteria to qualify as holiday rental properties.
Oli Sherlock, the Managing Director of Insurance at Goodlord, commented on the development, describing the elimination of this tax regime as a sensible decision.
He believes it will contribute to balancing the buy-to-let market and potentially increase the availability of properties for long-term rentals in popular tourist destinations, major cities, and coastal areas.
Apart from these two major decisions, the Spring Budget also included the Commitment to build a million homes in this parliament.
Commitment to Build Millions of Homes This Parliament
In the Spring Budget, Chancellor Jeremy Hunt stated the Conservative Party’s pledge to construct one million homes by the end of the current parliamentary term, with an allocation of £242 million to new housing developments.
The funding is focused on several specific projects, including those in Canary Wharf in London, and in Blackpool, Sheffield, Liverpool, and Cambridge.
The goal for house construction has seen several revisions in the past few years. In 2021, the Conservative Party aimed to build 300,000 homes annually by the mid-2020s.
However, in December 2022, Housing Secretary Michael Gove described these figures as “advisory.” In 2023, the government restated its commitment to the one million homes target by the end of the parliamentary session.
Other Announcements That May Affect Landlords
The Spring Budget also introduced additional measures like:
Cuts to National Insurance
The rate has been decreased by 2% points, moving from 10% to 8% of earnings. The reduction aims to reduce the high tax burden and will positively affect various stakeholders in the property sector, including employers, employees, agents, landlords, and tenants.
No huge changes in energy bills expected
The Chancellor announced a commitment to enhancing clean energy usage, with a goal for 25% of homes to be powered by nuclear energy by 2050.
However, there were no significant announcements regarding immediate relief for households facing high energy bills.
The freeze on fuel duty
The fuel duty will remain constant at 53p per litre, which the Chancellor estimates will save the average car driver about £50 annually.
The freeze is beneficial for letting agents who need to travel frequently for property viewings.
The Chancellor also has announced a proposal to raise the VAT registration limit from £85,000 to £90,000. The adjustment remained unchanged since 2017 and is expected to be well-received by small business proprietors, including those running independent agencies.
Takeaway
The new budget measures are focused on streamlining the residential property market, making it easier for individuals to sell and buy properties.
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References:
https://blog.goodlord.co/spring-budget-2024-for-letting-agents-and-landlords
