On Wednesday 6th, March, the Chancellor of the Exchequer, Jeremy Hunt, announced the Spring Budget.
This announcement revealed changes to National Insurance and a tax on vaping, among other things. One of the more controversial announcements involved changes to the way property is taxed, which could impact homeowners and landlords across the country.
Changes to Furnished Holiday Letting Tax Regime
The Spring Budget announced that the government is making the property tax system fairer by abolishing the Furnished Holiday Lettings Tax regime to tighten the gap between short-term and long-term lettings.
The Furnished Holiday Letting (FHL) tax regime in the UK offers unique tax advantages for owners of holiday properties that are available for short-term rentals. Qualifying properties benefit from tax advantages such as the ability to claim Capital Gains Tax reliefs for traders, capital allowance for items within the property, and the profits count as earnings for pension purposes.
This regime encouraged the investment in holiday properties by providing tax incentives that are not available to standard residential rental properties. With this regime being scrapped, many FHL owners may consider long term rental, or selling their property. Property owners affected by this change should seek legal advice from an expert conveyancing solicitor.
Changes to Capital Gains Tax
When a property is sold, it is subject to Capital Gains Tax (CGT), which is a tax on the profit made from the selling of that property. Alongside scrapping the FHL tax regime, Hunt also announced that CGT on residential properties will be reduced in an attempt to boost the property market, with less CGT being payable when properties are sold. The rate has been reduced from 28% to 24%.
Changes to Stamp Duty Land Tax
There was also a change to the reliefs for Stamp Duty Land Tax (SDLT). Multiple Dwellings Relief has been abolished; this relief allowed property investors to pay a reduced tax rate when buying multiple properties in a single transaction. This tax relief has previously been criticised as some property owners have unfortunately abused this relief in an attempt to avoid payment of tax. With the new rules established in the Spring Budget, SDLT must now be calculated against the value of each property combined, rather than the average value. Buyers should seek legal advice from a qualified conveyancing solicitor to ensure they are meeting all tax obligations when purchasing property.
Contact us
Overall, the intention of this new budget is clear, to revitalise the residential property market by incentivising selling properties, opening up housing opportunities for buyers. If you’re looking to buy or sell and are unsure about how these new rules could impact you, our Residential Property team are on hand to help you make sense of these changes.
Our conveyancing solicitors pride themselves on providing first-class care and expertise, and they come highly rated by our clients on Review Solicitors. If you would like to talk to one of our team for expert legal advice on your property transaction you can contact us using our contact form or give us a call at 0330 111 3131.