As part of the Spring Budget, Chancellor Jeremy Hunt announced a number of property taxation changes.
First, following a review of the current furnished holiday lettings tax regime, Hunt concluded that the regime was “creating a distortion” – meaning that there are currently not enough properties available for long term rental by local people.
In a bid “to make the tax system work better for local communities,” Hunt abolished the regime, to provide more options for prospective tenants.
In addition, the Chancellor also abolished Multiple Dwellings Relief – designed for people who purchase more than one dwelling in a single transaction.
While the relief was intended to support investment in the private rented sector (PRS), Hunt said that an external evaluation provided “no evidence” it would have done so – thus resulting in its abolishment.
In further Stamp Duty amendments, legislation is set to be updated to ensure that from today, 6 March 2024, registered providers of social housing in England and Northern Ireland are not
liable for Stamp Duty Land Tax (SDLT) when purchasing property with a public subsidy.
Public bodies will also now be exempted from the 15% anti-avoidance rate.
Additionally, rules for claiming First-Time Buyers’ Relief from Stamp Duty Land Tax in England and Northern Ireland will be amended so that individuals buying a leasehold residential property through a nominee or bare trustee will be able to claim First-Time Buyers’ Relief – including victims of domestic abuse.
Following analysis from both the Treasury and the OBR on the current levels of Capital Gains Tax on property, the Chancellor also announced a reduction in the higher rate of property Capital Gains Tax from 28% to 24%.
Reaction:
Capital gains tax the small rabbit out of the hat
Sam Reynolds, CEO of Zero Deposit:
“It’s disappointing to see the Government implementing further measures to reduce the financial profitability of many landlords with both a clamp down on short-lets and multiple dwellings relief.
“There’s no denying that the increasing prevalence of short-term lets can have a detrimental impact on local housing markets, but the irony is that this problem has been made substantially worse due to the Government war waged against private landlords in recent years.
“Many landlords have made the decision to move the short-term lettings space as a direct result of previous legislations designed to reduce buy-to-let profitability and, as always, the Government is now playing catch up in addressing a problem of its own making.
“However, the rabbit out of the hat, albeit a small one, was a capital gains tax reduction. While it could be argued that this might tempt even more landlords to now exit the sector, it should, at the same time, make buy-to-let investment more attractive and encourage more landlords to invest.”
Ed Phillips, CEO of Lomond, Ed Phillips:
“Disappointing to see the UK property market receive the Budget cold shoulder yet again following what was a lacklustre Autumn Statement.
“However, the property market has weathered a tough few months and has held firm despite many predictions of an impending collapse.
“We’ve also seen early signs that buyers are returning despite interest rates remaining at their highest since 2008 and this has also caused house prices to start to creep up.
“This resilient performance is no doubt why the Government has chosen to refrain from any property focussed initiative in the Spring Budget and it’s very much a case of no news is good news in this respect.”
Verona Frankish, CEO of Yopa:
“Time and time again, we’ve seen the Government opt to keep the housing market afloat by exacerbating the demand supply imbalance and there was a very real danger that they would make the same mistake today with the launch of the 99% mortgage.
Thankfully, this ill-advised initiative hasn’t come to fruition as it would have dangerously overheated the property market, pushing house prices beyond the record highs seen in recent months and further out of reach for the average buyer.”
Jason Harris-Cohen, CEO of Open Property Group:
“While stoking the furnaces of buyer demand may help ignite the property market from a house price perspective, doing so is not without its drawbacks.
“In fact, we’ve seen how overloading the property market can be detrimental in the long-run and in the wake of the stamp duty holiday many buyers and sellers were subject to lengthy delays, with the number of transactions subject to fall throughs also spiking notably.
“There’s no doubt similar issues would have arisen had the 99% mortgage become a reality.
“Yes, market conditions have slowed in recent months but we’ve already seen signs that this is on the turn and the Government has made the right decision today to adopt the slow but steady approach to re-cultivating market health.”
Colby Short, co-founder and CEO of GetAgent.co.uk:
“The Government has dodged a bullet by pulling their ambitions for a 99% mortgage at the eleventh hour and the property market will be better off from it in the long-run.
“Artificially inflating the market via gung-ho, demand led initiatives, without addressing the issue of supply, is a dangerous game to play and one that can ultimately cause the market to collapse.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“More stimulus for the housing market is desperately needed to boost transactions and social mobility, so this Budget was a missed opportunity.
“While there has been some recovery in the housing market since the start of the year, it is still quite subdued and getting on the housing ladder is so difficult, particularly in higher-value areas such as London and the southeast, unless you have access to a significant deposit.
“Is there going to be a flurry of sales from landlords because they will make a saving on capital gains tax?
“No, they are in it for long-term gain, capital appreciation combined with income yield.
“Of course, that yield has been hit hard with higher interest rates and more regulation, as well as the inability to offset mortgage interest but professional landlords are committed and not going to start selling because of a slight reduction in CGT.
“Perhaps with rents so high the last thing we need is a reduction in homes to rent anyway?
“The abolition of the furnished holiday lettings regime was expected – it levels the playing field with other landlords and is better for local communities.
“The cut in National Insurance could benefit mortgage borrowers. Someone earning £30,000 a year would see a net gain of £610 per annum; if they used that money to overpay their mortgage by £50 per month, the mortgage would be paid off nearly three years early, saving more than £10,000 in interest [based on a £130,000 mortgage over 25 years at a rate of 4.5% paid back two years and nine months early, saving £10,980 in interest].”
Damian Thompson, director for The Mortgage Works:
“The Chancellor’s announcement of tax changes highlights the ongoing need for a comprehensive plan that covers all types of renting.
“The current piecemeal approach means we lack a clear pathway to tackle the range of complexities faced by both tenants and renters.
“By establishing a cohesive strategy for all tenures, the government would be better placed to implement policies that lead to more homes becoming available, help landlords offer long-term tenancies as well as support other economic activities.
“The private rental sector is crucial for the economy by providing homes to those who can’t or would not prefer to own a home.”
Timothy Douglas, head of policy and campaigns at Propertymark:
“It is pleasing to see property taxation under the spotlight in the Spring Budget and the introduction of measures to level the playing field and support more homes for people to rent.
“However, overall, the Spring Budget stops short in addressing the key issue of lack of supply in the private rented sector which is higher rates of Stamp Duty when purchasing a buy to let property.
“Furthermore, whilst additional funding is welcome for housebuilding, the Chancellor has missed the opportunity to bring in Stamp Duty reliefs and wider reforms to support more people to buy and sell their dream home which comes with a guaranteed boost to the economy.”
Rohit Kohli, director at The Mortgage Stop:
“Yet another blow to landlords who seem to be cannon fodder for this Government, which is strange given how many of them are landlords themselves.
“The limited company route is looking like the only way forward for anyone looking to invest in rental properties.
“There was nothing in this Budget to encourage more building, just a complete lack of imagination and ideas.”
Amit Patel, adviser at Trinity Finance:
“Aspiring homeowners will welcome this news with open arms.
“This will put home ownership in reach of more people who live in areas where holiday lets have seen a huge boom since Covid.
“In recent years, many people have been priced out of buying a home in the villages and towns where they have grown up where there has been a high concentration of holiday lets.
“This is a win for the public, but a blow to property investors.”
Graham Cox, founder at Self Employed Mortgage Hub:
“Abolishing holiday lets tax relief is long overdue. The fact is places like Cornwall and Devon have some of the lowest wages and highest house prices in the country.
“Much of this is driven by non-locals snapping up homes to let out to holidaymakers. The priority has to be enabling the housing needs of the local population.”
Dariusz Karpowicz, director at Albion Financial Advice:
“This development represents a further significant shift in the property investment landscape, signalling a broader strategy that may affect a range of investment properties, including those held by limited companies.
“The decision to phase out tax incentives for holiday lets, which were previously perceived as a leverage point for diversifying investment portfolios within the real estate sector, hints at a broader governmental effort to recalibrate the housing market.
“It suggests an increasing scrutiny over investment models that may contribute to the housing shortage or affect the availability of long-term rentals. Given these circumstances, it is prudent to consider the broader implications of this policy change.
“This may include anticipating potential adjustments in the tax framework affecting limited company landlords, as part of an ongoing strategy to address the housing market’s dynamics and encourage the provision of long-term housing solutions.”
Emma Jones, managing director at Whenthebanksaysno.co.uk commented:
“Holiday let landlords should be considering limited companies for their new holiday let purchases to offset this news on the tax relief being scrapped.
“It’s a shame landlords have been impacted yet again as the last 18 months have been the most challenging for those with longer term lets.
“To impact the rest of their portfolios that may contain holiday lets, which allows them to balance their higher rates across their debt, is another body blow from this Government.”
Ranald Mitchell, director at Charwin Private Clients:
“The abolition of the Holiday Lettings regime closes the net on those benefiting from the tax advantages of short-term lettings.
“The changes will hit holiday let and Airbnb businesses hard, bringing the taxation of them more in line with buy-to-let investments.
“These changes are expected to add an extra £300m to the Treasury’s coffers.”
Matthew Jackson, director at Mint FS:
“This move is designed to make landlords offer more properties in certain locations for long term rental. In reality it will probably make them sell the properties, which in Cornwall and Devon will mean people buying them as holiday homes.
“Why? Well a large number of our portfolio landlords added Holiday Lets and Airbnbs to their portfolios to supplement income and make up for rising mortgage costs and running costs of their standard rental properties in their portfolio.
“The Chancellor is removing this incentive, delivering yet another blow to professional landlords and one that will not have the outcome he would like.”
Imran Hussain, director at Harmony Financial Services:
“A kick in the proverbial for holiday let investors but welcome news for first-time buyers in areas where holiday lets are rife.
“We all expected some major shake-ups but all the property market has received is a little extra taxation, and nothing to solve the issue of building more affordable homes.”
Justin Moy, managing director at EHF Mortgages:
“Holiday let activity had started to fall anyway as the opportunity to travel overseas has become more popular again, so this may be a bit late to install, but will hugely support those who have become outpriced in their local areas.
“Many will look to sell given this impending tax increase and falling demand. Let’s hope those first-time buyers can afford the mortgages required to buy.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“Communities in the likes of Devon, Cornwall and Angelsey will welcome this change, as housing shortages are a real problem in these areas.
“This could have the effect of damaging these local communities though, as tourism is reduced.
“This is a careful balancing act that the Government needs to get right to protect those born and brought up in areas that attract many tourists, without damaging their chances of a prosperous life if they choose to remain in the area.”
Michelle Lawson, director at Lawson Financial:
“This Budget was another missed opportunity to help people get on the housing ladder and really generate some positivity in the property market. Instead, we’ve had another tax raid on landlords.
“Local residents have the same opportunity to buy properties as landlords do- the bigger problem is deposits, interest rates and affordability.
“This isn’t going to generate more properties for holiday towns at all, it is just an easy tax win to put money in the coffers.
“This Government have clearly ignored all the advice given to them about stimulating the property industry.”
Mark Robinson, managing director at Albion Forest Mortgages:
“Unfortunately, what this Government doesn’t seem to realise is that the lack of long-term lets is due to the profit in them falling through the floor due to increased regulation and taxation.
“This is just punishing holiday lets for the sake of posturing.”
Akhil Mair, director at Our Mortgage Broker:
“Looks like the holidays are over for landlords in the vacation business.
“Time to dust off those long-term rental contracts and embrace the ‘staycation’ for our finances.”
Charles Breen, founder at Montgomery Financial:
“The abolition of tax relief for holiday lets is an exercise in futility. It fails to address the supply drought, while guaranteeing higher costs for holidaymakers, especially families.
“This policy seems to misunderstand the market’s needs completely. This is a Government completely bankrupt of ideas and backbone.
“Given the opportunity to reform the supply shortage in housing, they have proved themselves unable to make tough decisions.”
Gareth Davies, director at South Coast Mortgage Services:
“This has been coming to holiday lets for a while now. You could argue the scheme is open to more abuse than regular BTL so I’m surprised it has taken the Government this long.
“However, it doesn’t mean that locals in regions such as Devon or Cornwall are suddenly going to be able to afford properties that landlords may sell.”
Justin Corliss, technical manager at Royal London:
“The reduction in the higher rate of CGT for residential property disposals from 28% to 24% will be welcomed by those impacted.
“However, with no change to the scheduled reduction in the CGT exempt amount from £6,000 to £3,000 from 6 April 2024, the impact of this measure will be somewhat diluted.”
Jonathan Stinton, head of intermediary relationships at Coventry Building Society:
“It’s bizarre that another Budget has come and gone, and there’s been no substantial changes to Stamp Duty. It’s one tax which is so ripe for the change it practically fell into the Chancellor’s lap – yet he still missed it.
“It’s a blow for future homebuyers who now have just over 12 months to benefit from the temporarily reduced tax thresholds.
“Come April next year the tax bill on an average priced home is going to shoot up by £2,500, which means future buyers need to save an extra £208 per month to cover the difference.
“First time buyers weren’t even tossed a crumb and the silence around housebuilding is deafening.
“This Budget could have been an opportunity to present new innovative schemes which help buyers with affordability as well as saving for a deposit – but not even the bare minimum was done.
“It’s not only incredibly disappointing, it feels like a big mis-step on the Chancellors part.
“First time buyers are the foundation on which the rest of the housing market stands. Failing to give them proper help is failing to help the rest of the market.”
Chris Tremlett, co-founder of UK Homes Network:
“The 2024 Budget announcement was met with anticipation, especially within the real estate sector, eager for reforms that would bolster the market.
“The early signs of the budget’s direction became apparent during Prime Minister’s Questions (PMQs), when the Prime Minister concurred with the notion of prioritising brownfield sites for future development.
“This stance, coupled with an accusation towards the Labour party of intending to “concrete over” the entire green belt, seemed to foreshadow a budget potentially unsympathetic to the needs of the property industry amidst a pronounced housing supply shortage.
“Contrary to the industry’s hope for substantial reforms to the Stamp Duty Land Tax (SDLT) that would stimulate the market, the Budget introduced a relief lift specifically targeting purchasers of multiple properties.
“This move diverges from the anticipated support for broad-based market stimulation.
“The government’s commitment of £242m towards the development of 8,000 new homes in Canary Wharf was revealed, a figure that pales in comparison to the demand, representing a mere 2% of the annual new home construction target. This investment, while welcomed, underscores the monumental gap in addressing the housing crisis.
“Chancellor Jeremy Hunt announced the elimination of tax breaks for furnished holiday lettings, a decision that is likely to impact individuals countering the rise in HMO (Houses in Multiple Occupation) fines from local authorities by turning to serviced accommodation for higher returns.
“Moreover, the Budget included a reduction in the higher rate of Capital Gains Tax (CGT) for residential properties, decreasing from 28% to 24%.
“However, this seemingly positive change is overshadowed by the lack of clarity on the increase in CGT bills for businesses in the forthcoming tax year, driven by a reduction in the tax-free allowance from £6,000 to £3,000.
“The 2024 Budget thus presents a mixed bag for the property industry, with a few concessions but lacking the substantial support needed to significantly energise the market and address the housing supply crisis. The sector’s stakeholders are left evaluating the long-term implications of these measures on investment and development strategies.”
Vikki Jefferies, proposition director – LSL Property Services, PRIMIS Mortgage Network:
“Before this Budget, many people were not convinced any short-term pre-election measures were necessary for the housing market which, in terms of volumes is recovering of its own accord.
“Apart from a nod to housing in specific levelling up commitments, the abolition of both the furnished holiday lettings regime and duty relief for people buying more than one dwelling, housing investment and reform on any real scale was notable by its absence.
“It will be interesting to see how election manifestos pan out on the back of today’s announcements.”
Nick Leeming, chairman of Jackson-Stops: “As Conservative support hits its lowest level for more than 40 years according to Ipsos polling, and with property transaction volumes at an 11 year low, many of us were rightly hopeful of a clear priority plan on property from the Chancellor today.
“Yet with nothing to lose, and a statement of over an hour, it seems Hunt has gone for a rabbit in headlights approach on housing with major changes to property taxation avoided.
“For many voters ready to hit the polls in a matter of months, the decision to not address supply issues that have been slowing down homeownership for huge swathes of the country for a number of years, could be a defining moment for the current government.
“If the property market is looking for a small win to be taken from today, the cut to property Capital Gains Tax from 28% to 24% should, to some extent, increase the number of transactions particularly within the prime market.”
Henry Jordan, Nationwide’s director of home:
“As an organisation whose purpose it is to support people into a home of their own, we are disappointed that the Chancellor hasn’t announced any substantial measures to support first-time buyers in today’s Spring Budget.
“Nationwide continues to call for a government-commissioned, independently-chaired review of the first-time buyer market – this is needed to help Government produce a sustainable long-term strategy to support people hoping to purchase a property.”
Richard Harrison, head of mortgages, Atom bank:
“It’s undeniable that Stamp Duty discourages many buyers, whether they are looking to upsize or downsize, so it’s disappointing that there have been no changes made to the regime.
“The increases in house prices seen in recent years have meant that buyers have faced ever growing tax bills, which only serves to tie up the market.
“The step to 10% Stamp Duty on transactions of above £925,000 in particular is so steep that it does stall the market at this level, discouraging downsizing and impacting other areas of the market down the chain.
“I would like to see the Government look at more fundamental and enduring changes to the way stamp duty works.
“Previous measures have all too often been temporary at best and ultimately mean these market issues remain.”
Sam Mitchell, CEO of Purplebricks:
“The failure to permanently act on stamp duty is a missed opportunity for the government to stabilise the fragile recovery that we’ve seen in the housing market so far in 2024.
“Jeremy Hunt should’ve acted now or not at all. Rumours will continue to build of cuts or increased stamp duty holidays, as they did following the Autumn Statement, which could wrongly and unnecessarily delay buying and selling decisions.
“The lack of a concrete decision leaves the market at a standstill, which is particularly damaging for first-time buyers looking to enter the market.”
Paresh Raja, CEO of Market Financial Solutions:
“In his attempts to woo voters before the upcoming election, the Chancellor missed a trick by not bringing forward more meaningful, positive policies for the property market. But we knew that was likely to be the case.
“Cutting property CGT rates will be welcomed in some quarters. But elsewhere, after years of tightening regulation in the buy-to-let market, the Government has indeed now moved to put the squeeze on holiday lets.
“Ensuring there are ample properties available for local homebuyers in tourist hotspots makes sense, but it is regrettable that the solution is always to target investors and penalise landlords rather than boosting supply through greater investment into housebuilding.
“We also have to be alert to the fact that scrapping non-dom tax rules risks damaging the appeal of the prime London property market among international investors.
“Time will tell how plans for a shorter-term non-dom-style tax status might take shape, but given Labour was already pushing to scap non-dom status, we should not expect much relaxation in this reform.
“That there was so little by way of stamp duty reforms, housebuilding commitments or ways of incentivising landlords to invest in their properties – particularly for energy efficiency purposes – was disappointing.
“It was telling that Hunt praised the Government for having overseen the building of one million new homes in this parliament, even though this figure falls well short of what is needed in a five-year period. Meanwhile, suggestions of new 99% mortgages did not come to fruition.
“Ultimately, after two years of rising interest rates, today’s Budget would have been an opportune moment to bring about a string of policies and reforms to boost the property market. It feels like a missed opportunity.”
Richard Donnell, executive director at Zoopla:
The budget marks another missed opportunity to take action on boosting supply and mortgage availability in the housing market.
“The consensus is that the country needs more new homes. Supply has increased but this has stalled. There is a need for widespread reform of the planning system to encourage supply. More funding is needed for social and affordable homes, and housing infrastructure investment to unlock supply.
“The Government should also look to support the emergence of a long-term fixed rate mortgage market as a matter of urgency. This will help more young people with smaller deposits access home ownership – particularly in southern England where deposit size is the biggest barrier to getting on the housing ladder.”
“Another missed opportunity is the decision not to make the £625,000 threshold for first-time buyer relief permanent. This means 30% more first-time buyers will be liable to pay full stamp duty from March next year.”
