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Spring Budget

Spring Budget 2024: what you need to know

Q1 2024

Chancellor Jeremy Hunt has unveiled a handful of property tax changes in the Spring Budget, in what could be his last before a General Election.

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Matthew Henderson

Associate Director, Residential Research

+44 (0) 7818 254017

Despite much speculation, a new 99% mortgage scheme to help buyers get onto the property ladder was not announced.

From reducing capital gains tax (CGT) on property, to abolishing multiple dwellings relief, here’s four housing announcements from the Spring Budget and what they could mean for you.

1. Higher rate of CGT for property cut

The rate of CGT that higher or additional rate taxpayers pay on gains made from selling a residential property will drop from 28% to 24% from 6 April 2024.

However, private residence relief will remain in place. This means that the “vast majority of residential property disposals will pay no CGT”, the government said. Basic rate taxpayers will continue to pay 18% on gains.

Matt Henderson, associate director in our Research team, said the cut should encourage people with multiple properties to transact, particularly at the top end of the housing market. “Any change that boosts transaction numbers should be welcomed,” he said.

He warned though that it could lead to landlords selling up and exiting the private rental sector (PRS).

“The exodus of further landlords from PRS will not do well to combat a severe shortage of good quality rental stock and the cost of renting,” Matt explains.

“Conversely, it may encourage new investors to enter the market as they are more able to profit from anticipated capital appreciation.”

2. Multiple dwellings relief scrapped

Buyers will no longer be able to claim stamp duty relief when they purchase more than one home in a single transactionfrom 1 June 2024.

Multiple dwellings relief allows people to buy multiple properties at once and pay stamp duty on the average price across all of them rather than the total price.

Hunt claimed an external evaluation of multiple dwellings relief revealed “no strong evidence” that it supported investment into the PRS and that it was “being regularly abused”.

Buyers who exchanged contracts on or before 6 March 2024 can continue to benefit from the relief regardless of when the transaction completes, as will any other buyers who complete before 1 June 2024.

Oliver Custance Baker, head of our National Country House Department, said that while the policy “may immediately scream ‘bulk flat purchases in urban centres’, it’s something that will have an impact on the country market”.

He explained: “Country homes of a certain size often have a cottage, annexe or converted barn which – if accounted for as separate dwellings in a transaction or linked transactions – mean the stamp duty payable is reduced.

“Reduced stamp duty has always been an incentive for property purchases, as we’ve seen from the introduction of this relief to stamp duty holidays, and mixed-use discounts.

“We expect we will see buyers calculating stamp duty with greater attention to detail in light of these changes, and factoring this into their total spend.”

3. UK non-dom tax system abolished

Tax rules for foreign residents in the UK who have non-domiciled tax status (‘non-doms’) will be scrapped. They will be replaced “with a modern, simpler and fairer residency-based system”, Hunt said.

It means that from 6 April 2025, new arrivals to the UK will not pay tax on foreign income and gains for the first four years. After that point, those who continue to live in the UK will contribute the same tax as other UK residents. Transitional arrangements will be introduced for existing non-doms.

The government said: “This will ensure that all UK residents who stay in the UK for over four years will pay the same tax on their foreign income and gains, regardless of their domicile status, creating a modernised regime that is simpler, fairer and more competitive.”

James Gow, head of London sales, pointed out that the phased scrapping of non-dom status is something that many London residents had been anticipating.

He explained: “There have been murmurs that its implementation may encourage an exodus of non-domiciled high net worth individuals to more attractive tax systems such as Ireland.

“I would counter this assumption however, in highlighting the continued attractiveness of Prime Central London as not only a place of investment, but as a global capital.

“Overseas stamp duty hikes and reform over the past few years have done little to dent demand for London property; the city continues to be a magnet for those seeking the best in global education and culture, stability and security as well as being one of the world’s main financial hubs.

“And while land scarcity and the subsequent low supply of new build homes in central London is well recognised, it’s unlikely that this change will have an immediate impact on demand for the best properties London has to offer.”

Our forecast of up to 15% growth for Prime Central London property values over the next five years remains unchanged.

4. Furnished holiday lettings tax regime ended

Furnished holiday let owners will no longer be able to take advantage of tax perks.

The government said it was abolishing the furnished holiday lettings tax regime “to level the playing field between short-term and long-term lets and support people to live in their local area”.

The change will come into effect from 6 April 2025 and draft legislation will be published in due course.

Hunt said it follows concerns that the existing tax regime is ‘creating a distortion meaning that there are not enough properties available for long term rental by local people’.

Anna Ambrose, head of Lettings, says this removal will go some way to increase fairness between short and long term lets in a supply constrained lettings market, but it’s unlikely to have huge market significance. She claims only a small number of investors looking to purchase with intentions to purely let on a short-term basis and very few second-home owners qualifying at present and “the removal of this relief is unlikely to result in any significant number of landlords selling up.”

What it may do however is encourage short-term let landlords to rethink their strategy, and Anna claims she would always encourage these landlords to consider a more traditional long let market, “particularly while stock levels remain low and rental prices continue to increase.”

It’s also worth highlighting that the proposed changes will however have a negative impact on rural businesses who have diversified into holiday lets thanks, assisted by the tax relief previously on offer.

The government recently unveiled reforms that would require landlords to seek consent for new short-term lets. The proposed planning rules are designed to help people in areas “where high numbers of short-term lets are preventing them from finding housing they can afford to buy or to rent”.