Threshold Mortgage Advice

What does the Spring 24 budget mean for landlords and second homeowners?

The sight of the Chancellor of the Exchequer brandishing his red briefcase outside Downing Street will be a familiar image to those of us living in the UK. An event that happens twice a year (first in Spring, then in Autumn), the details of what HM Revenue and Customs have planned, and just how these will impact consumers’ pockets, is always met with national interest.

It was no different when Chancellor Jeremy Hunt took to the podium on 6 March this year to announce his Government’s latest public spending and taxation cuts. Following a term where new build homes have fallen short of target and inflation has spurred rising rents, many were keen to hear how the budget might bring some relief.

In that regard, it was a mixed bag, with positive news for some bringing woes for others. If you missed it, or you’re unsure in what way the incoming changes impact you, here’s a key breakdown of the main takeaways that residential landlords, second homeowners, and those offering holiday lets in the UK should be aware of:

  • The furnished holiday letting scheme is being abolished

    One of the biggest changes announced in the Spring budget is the decision to do away with the furnished holiday letting scheme, an announcement that came as a major blow to the private UK holiday lettings market.

    The change, due to take effect in April 2025, will see the current £4,000 tax break, for landlords who collect £30,000 a year in rent, scrapped, with no planned tax relief changes in the pipeline to subsidise or replace this deficit.

    Anyone who owns a second home that they let out as a holiday unit will be impacted by this incoming change. This includes the estimated 7% of second homeowners who, according to the English Housing Survey (EHS), rent out their home to holidaymakers each year on short term lettings platforms like Airbnb.

  • Higher rate Capital Gains Tax on buy-to-lets and second homes is reducing

    Buy-to-let landlords and second homeowners are set to feel the impact of the government’s decision to reduce the higher rate of capital gains tax from 28% down to 24%. This, however, will yield a positive result, in a move that some may interperet as the government trying to provide relief to landlords following the phasing out of tax initiatives such as Mortgage Interest Relief.

    Of course, the benefit will only be felt if and when a landlord or second homeowner decides to sell-up, providing of course that the property value has also increased since it was acquired.

    As capital gains tax only applies to those selling second homes, this won’t benefit property movers that sell their main residence. It does, however, mean that landlords or second homeowners selling up will get to retain a larger proportion of the profit from the sale, as early as this April 2024

  • Multiple dwellings relief is set to be scrapped

    The last of the Chancellor’s big budgetary announcements to impact property investors comes in the form of the end of multiple dwellings relief (MDR).

    Due to take effect from June 2024, the abolishment of MDR effectively means that buyers in England and Northern Ireland who are purchasing more than one residential property in a single transaction, or as a linked transaction, will no longer benefit from Stamp Duty Tax relief on the transaction.

    Introduced in 2011 to help spur investment in residential property and the private rental market, the measure is now being abolished due to findings from HMRC’s Tax Relief Evaluation Programme concluding that MDR has minimal positive impact on overall housing supply or private rental property investment.

    With HMRC further revealing that MDR cost £700 million in the tax year 2022 to 2023, the decision to abolish it was also cited as financially motivated, given that MDR was not proving cost effective to maintain.

What’s the key takeaway?

With the abolishment of MDR and the furnished holiday letting scheme, the government would appear to be U-turning on its previous incentives to encourage growth in the UK property sector, particularly among private landlords and second homeowners.

The slash to higher rate capital gains tax also appears to be a move towards making it more lucrative for landlords to sell-up and release more properties onto the housing market.

With the change to capital gains tax taking effect this year, and the abolishment of the furnished holiday letting scheme delayed until April 2025, it will be interesting to gauge the response from second homeowners, landlords, and the private holiday lets market.

Want to discuss your property portfolio?

If you’ve got mortgages on two or more properties and you want to know how best to manage your portfolio in the wake of the Spring 24 budget, we can help.

Our expert advisors are available seven days a week, for queries relating to residential, buy-to-let, or holiday-let mortgages. Book an appointment via our website.

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