Budget Changes to Property Taxes Explained

Yesterday’s budget saw some major changes to the taxation of property, specifically in relation to stamp duty, and taxes raised on furnished holiday lets.

 

What are the Budget Changes to Stamp Duty?

Stamp duty land tax, also known as SDLT, is paid when property is purchased. It applies to commercial and residential properties at different rates, including bare land and leasehold property.

Currently, you can claim relief when you buy more than one dwelling if a transaction (or a number of linked transactions) include freehold or leasehold interests in more than one dwelling. This can include properties with a self-contained annex, provided they fulfil certain criteria. This can often reduce the amount of SDLT payable on the transaction.

However, it has been announced that multiple dwellings relief on SDLT will be abolished from 1 June 2024. 

Property transactions with contracts that were exchanged on or before 6 March 2024, will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024.

The budget also brought in some more minor changes, including amendment to the rules for claiming first-time buyers’ relief from SDLT. The changes mean that

• those buying a leasehold residential property through a nominee or bare trustee will be able to claim first-time buyers' relief;
• from 6 March 2024, registered providers of social housing will not be liable for SDLT when purchasing property with a public subsidy; and
• public bodies will be exempted from the 15% anti-avoidance rate of SDLT.

 

Changes to Furnished Holiday Lets Tax Regime

The Chancellor has also announced that the special tax regime for FHLs will be abolished from April 2025.

A furnished holiday let, is a property that is commercially let (with the intention of making a profit) with furniture. This include holiday lets and properties let via AirBnB. It must also pass certain occupancy conditions.

There are currently special tax rules in place, which apply to rental income from properties that qualify as furnished holiday lettings (FHLs). These rules allow landlords to claim full mortgage interest relief and benefit from lower capital gains tax.

FHL is being abolished to “to level the playing field between short-term and long-term lets and support people to live in their local area.” The idea is, that landlords will no longer have an incentive to let properties out on short-term holiday lets. It is hoped that landlords will instead opt to rent their properties out on longer-term lets, for  people living in their local area.

 

What Effect Will Budget Changes Have?

Whether these changes will hinder or help the current property market remains to be seen.

There should be minimal impact on purchasers buying their next home. However, those using property for business are more like to be affected.

Short-term rental landlords may look to sell their current stock causing a surge in the sales market, which may well be offset if investors are deterred from future purchases.

If you have any issues with the changes announced in the budget, we will be happy to help. At Samuels Solicitors we have been helping clients with property related issues for decades. Contact us today to find out what we can do to assist.