Budget Announcements on Housing: Experts Call for Cautious Optimism
The Spring Budget 2024, delivered by Chancellor Jeremy Hunt, has introduced significant changes that will impact property owners and investors. The focus of the Budget was on property capital gains tax (CGT) and the furnished holiday lettings (FHL) regime.
### Property Capital Gains Tax (CGT)
The government has proposed adjustments to CGT rates and reliefs in the property sector. While the exact changes related to residential property transactions from the Spring Budget are less detailed, the Budget includes potential increases in Business Asset Disposal Relief rates and adjustments in lower and higher CGT rates. These revisions will affect the tax paid on gains realized from selling property assets, including second homes and buy-to-let investments. An increase in the higher CGT rate could result in a significant rise in the tax bill for property disposals.
### Furnished Holiday Lettings (FHL) Regime
Although there were no major immediate reforms to the FHL rules announced in the Spring Budget 2024, historically, FHLs have benefited from favorable tax treatment compared to standard residential lettings. The government defines qualifying criteria (e.g., minimum number of letting days) that allow owners to access capital allowances, income tax treatment, and capital gains reliefs more advantageous than those available to other buy-to-let properties. Property investors and owners operating within the FHL sector should watch for any future detailed updates regarding changes to the FHL regime.
### Overall Impact
Property investors and owners will likely face higher CGT liabilities if selling properties due to the increase in CGT rates. Without confirmed changes to the FHL regime, those operating within that sector may continue to benefit from its current tax advantages. Furthermore, changes in Stamp Duty Land Tax (SDLT) thresholds and rates from October 2024 and April 2025 will indirectly affect property market dynamics, influencing buying decisions and potential capital gains.
Experts within the housing sector have expressed a healthy dose of scepticism towards the government's ambition to build a million homes in this Parliament. The decisions regarding property were not met with a positive reception from experts such as Lauren Hughes, head of customer success at Vouch, and Oli Sherlock, managing director of insurance at Goodlord, who noted that the Budget did not deliver much in the way of housing reform.
In addition to property-related changes, the Spring Budget 2024 includes other measures such as the National Insurance contribution rate cut from 10% to 8%, starting from April, and the extension of the Household Support Fund for six months. The abolition of multiple dwellings relief (MDR) was also announced, which may have an impact on certain sections of the industry.
Sources: [1] [HM Revenue & Customs](https://www.gov.uk/government/publications/spring-budget-2024) [2] [Office for Budget Responsibility](https://obr.uk/budget-2024/)
- Property investors and business owners may face increased tax liabilities after the Spring Budget 2024 due to proposed changes in Business Asset Disposal Relief rates and adjustments to lower and higher Capital Gains Tax (CGT) rates, affecting the sale of property assets such as second homes and buy-to-let investments.
- While the Spring Budget 2024 did not announce major immediate reforms to the Furnished Holiday Lettings (FHL) regime, property investors and owners operating within this sector have been advised to monitor for future updates, as the tax advantages enjoyed under the FHL regime may still provide them with favorable tax treatment compared to standard residential lettings.
