Spring Budget 2024 – Chancellor attacks holiday rentals and Multiple Dwellings Relief

Spring Budget 2024 – Chancellor attacks holiday rentals and Multiple Dwellings Relief

13:47 PM, 6th March 2024, About a month ago 45

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The Chancellor Jeremy Hunt has announced the end of a tax scheme that offered tax incentives for landlords with holiday lets in favour of long-term renters.

He said the Furnished Holiday Lettings regime was causing a ‘distortion’ in the housing market and depriving local people of affordable homes.

Mr Hunt said: “I am concerned this tax regime is creating a distortion meaning there are not enough properties available for long term rental by local people.

“So, to make the tax system work better for local communities I am going to abolish the Furnished Holiday Lettings regime.”

Allowed holiday let landlords to claim tax relief

The scheme allowed holiday let landlords to claim tax relief on their properties if they let them out to holidaymakers for at least 105 days a year.

Mr Hunt said he had also examined the Multiple Dwellings Relief, which gave stamp duty discounts to buyers of multiple properties in one transaction.

He said this relief was meant to encourage investment in the private rented sector, but an analysis found it had failed to do so and was ‘being regularly abused’.

The FHL proposal was flagged up by the Sunday Times with a potential of ending tax breaks worth £300 million and will see the regime being abolished from April 2025.

Landlords received some good news from the Chancellor

However, landlords received some good news from the Chancellor, who said he was lowering the higher rate of property capital gains tax from 28% to 24%.

He said this move was based on the advice of the Office for Budget Responsibility and the Treasury, who had found that it would boost revenues by stimulating more transactions.

Mr Hunt added that the cut in property capital gains tax was ‘for you, Angela’, referring to the Labour deputy leader Angela Rayner over her recent issues when selling a council house.

Other notable announcements in the Chancellor’s Budget include:

  • VAT registration threshold for businesses to rise from £85,000 to £90,000 from April.
  • The government will continue to provide the same amount of money for the Household Support Fund (HSF) for another six months. The HSF is a programme that started in 2021 to help families cope with the increasing expenses of living. The fund is distributed to local councils to aid families with low incomes in their regions. The money enables local councils to offer families assistance through food banks, warm spaces and food vouchers.

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Comments

Paul Essex

13:59 PM, 6th March 2024, About a month ago

They are entirely deluded if they think landlords will go back to the family rentals they left due to minimal returns and higher risk.

lips24x

14:10 PM, 6th March 2024, About a month ago

There is no delusion here. It is a great PR stunt to claim they are returning holiday lets to the PRS and at the same time increase tax revenue from income tax and capital gains in the Furnished Holiday Lettings sector

Paul

14:11 PM, 6th March 2024, About a month ago

All of mine ( apart from two ) are family rentals. No issues here. Pay on time and look after the properties and as I've been in it for a long period of time a nice return now.

I've not got any 'holiday homes' and do not benifit from multiple dwelling relief, so that's not an issue.

Reduction of Capital Gains Tax is the main benefit for me. Just wish they would bring taper relief back... Oh well...

JohnCaversham

14:27 PM, 6th March 2024, About a month ago

Its not clear whether the restrictions are for just personally owned properties or for Ltd trading outfits too, if it is across the board then there will be a huge impact on tourism and spending coming into those holiday area's and beyond if the services dry up.
Local government should be able to regulate the level of SA/FHl's with article 4 and other planning restrictions, not tax them into oblivion.
Short sighted numpties..
I run 4 SA/FHL units in Ltd structure which we've built up over time all mortgaged, if we can't offset our finance costs then we may as well leave and turn out the lights. Not in touristy area's but we have contractors working on civil build projects, business types, teachers who all value the flexibility we provide, it is the future. We moved to SA/FHL for all the usual anti landlord reasons and difficulties experienced.
Careful what you wish for..

Rod

14:32 PM, 6th March 2024, About a month ago

iHowz have published this comment:

The Private Rented Sector (PRS) houses over 20% of the population. Government and Social Landlords seeming to be unwilling/unable to step up and fulfil their obligations. It is a shame that, once again, the government has missed the opportunity to reinvigorate housing, especially the PRS.

Most landlords rent property to earn their living.
If landlords are unable to operate profitably, they will be forced to find another way to earn a living, with a consequential impact on housing.

Government don’t seem to be able to understand this simple conundrum.
Today's cut in National insurance does nothing to encourage landlords to provide more homes at lower rents.

Instead of the desperate tax grab against holiday lets – which has been forced on landlords by the onerous tax regime – iHowz has consistently called for a mix of reforms to stimulate the industry:

Allow Registered Landlords to reclaim Supplemental 3% SDLT on rental properties
Remove the requirement to pay Supplemental 3% SDLT on lease extensions
Index the Supplemental 3% SDLT threshold or link it to the standard SDLT threshold
Rescind Section 24 of the 2015 Finance Act
Allow rental profits to qualify for pension contribution tax relief, the same as other business profits
Extend the period for filing CGT return to 6 months
Make residential letting property a qualifying asset for CGT roll-over relief
Remove 8% CGT surcharge for rental properties, or some sort of retirement relief
Zero VAT rating should apply to Conversion, Refurbishment and Retrofit Works to match new build.
Energy Efficiency costs:
100% write down of costs in year of spend.
Grants with a long-term scheme which recognises a realistic approach (fabric first + achievable measures)

Poorly insulated homes lead to damp and mould, costing tenants more to heat. Funding for energy efficiency makes homes more efficient, provides many new jobs and helps the UK meet it legal commitment on emissions.

The current lack of housing has helped drive some local authorities to bankruptcy as emergency housing and other related support take a rising proportion of their budgets. And a lack of funding to support the courts to get their backlog under control has led some landlords to see the time for cases to be heard double and even triple. If landlords are not able to recover their property in a timely manner, they will sell up and invest elsewhere.

When will Government treat the industry with the respect it deserves? Landlords house people using their own funding, at minimal risk for the Government; you would imagine they would be more supportive of the housing sector which offers the most diverse selection of housing. Instead, the PRS is used as a political football to satisfy opportunists, who have no answer of their own.

Working forHMRC

14:38 PM, 6th March 2024, About a month ago

Reply to the comment left by JohnCaversham at 06/03/2024 - 14:27asking these same questions
i'm afraid my interpretation is that irrespective of ownership structure (ltd) that S24 will now apply to properties used for holiday lets, we cant call them FHL as this has just been abolished, so as the poster above correctly says, they are retuned to PRS under those rules..
10% entrepreneur relief gone
registering for business rates (small business rate relief) gone
using lettings income for pensions cont. gone
Capital allowances gone.
Mortgage interest relief gone, or at basic rate, he did not say, i suspect S24 applies
Now appears no difference between Holiday / SA/ PRS for tax purposes.
Holiday registration use coming as well.

Rod

14:39 PM, 6th March 2024, About a month ago

I would add

A budget almost exclusively of stick, rather than carrot for landlords

Those who have properties in their own name who had pivoted part of their portfolio to serviced accommodation / furnished holiday lets to counter S24 will be penalised from this April for running their businesses efficiently - something the chancellor is spending billions in the public sector to achieve.

The SDLT relief on multiple property purchase transactions has been removed, making it harder for landlords to sell a portfolio as a going concern.

The encouragement landlords got was to head for the exit with the top rate of CGT on residential property dropping from 28% to 24% - still a 4% premium on gains on any other asset, and presumably leaving an 8% premium payable for those on basic rate who are paying 18%

Clearly revoking S24 - which would have expanded investment in long term rental supply didn't cross his mind
The lost tax would have been recovered by increased supply forcing rents down, reducing housing benefit and emergency accommodation costs
That's got to be better than bailing out Birmingham, Nottingham and other failed councils who have forced up rents with indiscriminate licensing schemes.

Instead of giving us an extra £5,000 ISA for British Investments, he could have made residential property a qualifying asset in SIPPS, giving landlords some tax relief for their pension investment.

If landlords could register as a cultural or ethnic group, we'd be off the courts protesting discrimination.

Unless landlords join an association, so their voice can be heard, government will continue to ignore smaller operators in the PRS and focus solely on their plans for it to be run like the social sector with large corporate owners.

Take a look at what iHowz can do for you - at least you subscription is fully tax deductible.
https://ihowz.uk/

Dennis Forrest

14:39 PM, 6th March 2024, About a month ago

This is not levelling up this is leveling down. Rather than making making sure that BTL's enjoy similar advantages to FHL's like full tax relief on mortgages and better CGT terms when you sell, the chancellor has made FHL's worse without improving BTL's by one iota. Those selling holiday lets are just going to leave the property market altogether and perhaps if they want to keep some kind of property rental investment then just buy shares in Unite Group, student accommodation currently yielding 3.67%.

Rod

14:55 PM, 6th March 2024, About a month ago

Reply to the comment left by JohnCaversham at 06/03/2024 - 14:27
Well said.

Landlords operating through a corporate structure have jumped through the government's hoops and should expect the same respect from the government that they showed in the covid reliefs to those running compliant businesses.

How can they announce the withdrawal of a tax treatment less than a month from the new tax year when operators with seasonal businesses will already have a significant level of bookings from hard working families looking forward to a post pandemic break. Many others will be international tourists as we do our bit to promote Britain and balance the trade deficit with our goods and services export.

Politicians are happy to reminisce about their UK holidays - should we cancel their booking before we sell up?

JohnCaversham

14:56 PM, 6th March 2024, About a month ago

FHL owners will exit, fire sales will commence, at the least housing market may revive! Lol. But make no mistake landlords will not suddenly start buying and renting out properties via AST's again.

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