In general, the consensus seems to be that the Spring Budget 2024 was as good as it could be in an election year, with a greater emphasis on attention-grabbing headlines rather than on aiding SMEs or, more specifically, the property sector.
One of the main highlights was the cut in National Insurance Contributions (NICs) by 2p saving the average worker around £450 per year. Obviously more money in peoples’ pockets; however, coming at a time when many of us are still reeling from the effects of rampant inflation, this may only help to soften the curve, not completely eradicate it! Other key factors were the reduction in the higher rate of Capital Gains Tax (more on that below), the duty on alcohol remaining frozen until February 2025, the 5p cut in fuel duty extending for another 12 months and the VAT threshold increasing from £85K to £90K. Added to that was the introduction of a British ISA (tax-free allowance for savers investing in British companies) and the high-income child benefit threshold to increase to £60K. All in all, the budget aimed at pleasing the larger populace without honing in on one particular group.
So, what were the key points of note in the Spring Budget 2024 for those of us who are involved in property?
Stamp duty land tax (SDLT) The most significant changes relate to MDR (Multiple Dwellings Relief) in Northern Ireland and England. The plan to abolish MDR will have an impact on individuals purchasing more than one dwelling in a single transaction, as partial relief from SDLT was previously permitted. HMRC expressed concerns with, "potentially unfair outcomes, incorrect claims, or abuse of the rules," under this scheme. The new rules will take effect from 1st June 2024, and legislation will be introduced to facilitate the abolition of MDR. There are currently no changes being made to the existing laws in Scotland and Wales.
Capital Gains Tax (CGT) The capital gains tax (CGT) rate for residential property sales made by individuals and certain trusts will decrease by 4%, dropping from 28% to 24% starting from 6 April 2024. This adjustment is intended to potentially incentivise more landlords and second-home owners to sell their properties, thereby increasing the availability of homes for purchase, especially for first-time buyers. It is hoped that this change will also lead to an increase in revenue. Additionally, the lower rate for individuals will continue to be 18% for gains falling within the basic tax rate band.
Capital Allowances Landlords could potentially benefit from an extension of the full expensing to leased assets. Currently, the corporation tax relief is primarily aimed at companies investing in plant and machinery, with a historical exclusion for assets provided for leasing. Restrictions have been in place for any leased non-background plant and machinery. However, the government is planning to release draft legislation to explore the possibility of extending the full expensing rules, allowing lessors (potentially including landlords) to claim relief on currently restricted assets. It is important to note that these changes would only be implemented "when fiscal conditions allow," so any excitement about this should perhaps be tempered.
Furnished Holiday Lets (FHLs) Starting from April 2025, with certain anti-forestalling provisions in place from March 2024, the government intends to do away with the Furnished Holiday Lettings tax regime. This regime previously provided special tax treatment for qualifying FHLs. The elimination of this regime will remove the tax advantages for landlords who rent out short-term furnished holiday properties compared to those who rent out residential properties for longer periods. Some key potential benefits of being an FHL include the ability to claim CGT Tax reliefs for traders, the right to claim plant and machinery capital allowances for items like furniture, equipment, and fixtures, as well as the inclusion of profits as earnings for pension purposes.
In addition to the points mentioned above, the Spring Budget 2024 also addressed the Annual Tax on Enveloped Dwellings (ATED), which is anticipated to rise in accordance with inflation. Furthermore, there will be the implementation of rates relief for Film Studios starting from 1 April 2024, with the potential for up to 40% relief. Changes to the eligibility criteria for Empty Rates Relief were also outlined, including an extended reset period from 6 weeks to 13 weeks. This means that a property must be occupied for at least 13 weeks before any new period of 3/6 month empty relief is applicable. Additionally, there are intentions to conduct a consultation on the introduction of a General Anti-Avoidance Rule for business rates, aimed at addressing the issue of ‘Rogue Agents’.
In general, there isn't much notable news for the property community. Nevertheless, the decrease in CGT could potentially boost sales and purchases, leading to a invigorated property market and potentially more funds for sellers when considering their next venture. This, in combination with fiscal measures such as the reduction in NICs, and the freeze or reduction in alcohol and fuel duties, along with the potential for more families to claim Child Benefit, may alleviate individual budget constraints, potentially allowing for more room for investment or the ability to afford a wider range of properties for purchase or rental. This could subsequently influence the property market, leading to a more dynamic environment with various associated benefits.
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