Stamp Duty Relief and Holiday Let Tax Breaks Abolished
In a surprising move during the Spring Budget announcement, Chancellor Jeremy Hunt declared the abolition of stamp duty relief for individuals purchasing multiple properties. The decision, set to take effect from June 1, aims to address what Hunt termed as the “regular abuse” of the tax break. Hunt emphasised that the relief had failed to foster investment in the private rented sector, prompting the government to estimate an annual saving of £385 million.
The Treasury clarified that property transactions with contracts exchanged on or before March 6 will still benefit from the relief, regardless of when they complete. However, the announcement also signals the end of tax breaks encouraging second homeowners to let their properties to holidaymakers instead of long-term tenants, with the furnished holiday lettings regime being abolished from April 6, 2025.
Impact on Holiday Let Investors and Local Tourism
Quilter tax and financial planning expert Shaun Moore sheds light on the potential fallout for holiday let investors. The abolition of tax relief on furnished holiday lets could result in an average annual loss of £2,835 for investors. Moore expresses concern that this financial hit could lead to a reduction in the number of properties available for holiday lets, potentially impacting local tourism.
While the government anticipates an annual saving of £245 million from cutting holiday let relief, the move is not without its critics. The announcement prompts questions about the financial attractiveness of the holiday let business and its broader implications for the tourism sector.
Multiple Dwellings Relief (MDR) Scrapped
The Spring Budget also bids farewell to multiple dwellings relief (MDR), which previously provided stamp duty relief for individuals purchasing more than one property in a single transaction. Kate Davies, executive director of the Intermediary Mortgage Lenders Association (IMLA), expresses disappointment, stating that the abolition of MDR is a surprising blow to landlords.
Davies argues that scrapping this relief contradicts the government’s stated goal of encouraging investment in the private rental sector. The relief, estimated to have been worth £730 million to investors between 2016 and 2022, is now a thing of the past, potentially impacting the sector at a time when support is needed.
Capital Gains Tax (CGT) Reduction Offers Limited Relief
While landlords face setbacks with the abolition of certain reliefs, there is a slight reprieve in the form of a reduction in Capital Gains Tax (CGT). The tax, levied when landlords sell a property, will be reduced from 28% to 24% for higher or additional rate taxpayers selling residential property.
However, critics argue that this reduction is insufficient, especially considering the impending decrease in the tax-free allowance for CGT from £6,000 to £3,000 in April. The limited relief offered by the CGT reduction adds a layer of complexity to the overall impact of the Spring Budget on landlords.
Mixed Reactions and Missed Opportunities
As the dust settles on Chancellor Hunt’s Spring Budget announcement, reactions from industry experts are mixed. Some applaud the changes as necessary steps to stabilise the housing market, while others criticise the government for missed opportunities.
Sam Mitchell, CEO of Purplebricks, deems the failure to act on stamp duty a missed opportunity to support the housing market’s fragile recovery. The absence of a permanent resolution on stamp duty and the abandonment of the proposed 99% mortgage scheme have drawn criticism, leaving homeowners, aspiring buyers, and property investors with a complex and evolving landscape to navigate.