Spring Budget 2024 – Key new measures affecting the property sector

Whilst the headline was a 2% reduction in employee and self-employed national insurance, benefitting an estimated 29 million people, the property sector didn’t appear to get the stimulus it so desperately needs.

Here, Paul Atkins, Partner and Head of Property Tax provides a brief summary of the new measures affecting the property sector highlighting the key tax changes.

Investment in Housing
As we have seen in several fiscal events over the years there is commitment to make specific investments to boost housing delivery. In addition to the £188m allocated to housing projects in Sheffield, Blackpool and Liverpool announced last week, there is a commitment of over £240 million to build nearly 8,000 homes in Barking Riverside and Canary Wharf alongside a new life sciences hub.

Further to the Long-Term Plan for Housing announced in July 2023 offering targeted support to Cambridge, London and Leeds, the ambitious vision of 20,000 homes for Leeds has been outlined. In London, a Euston Housing Delivery group is being established with £4m investment to support plans to deliver up to 10,000 new homes.

Planning
Whilst fixing the backlog of planning applications has been a focus of this Government, the planning system is still failing to deliver for many. To try and assist, there is a commitment to invest £3m to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities. In addition, the introduction of Artificial Intelligence (AI) pilots to streamline the local plan development processes from seven years to 30 months is welcomed, however, time will tell whether the planning system becomes any easier.

Tax Changes
There have been some announcements made to encourage property transactions whilst also levelling the playing field.

Stamp Duty Land Tax (not applicable to Scotland or Wales)

Multiple Dwellings Relief (MDR) abolished from 1 June 2024
This relief allowed someone purchasing 2 or more dwellings in the same transaction, or linked transactions, to pay Stamp Duty Land Tax (SDLT) based on the average value of the dwellings purchased rather than the aggregate value. The relief was introduced in 2011 to promote private rented sector (PRS) housing supply and investment in residential property. An external review of the relief established that there was no strong evidence that MDR played a significant role in property investment.

For contracts which exchanged prior to 6 March 2024, MDR will continue to apply, even if completion takes place post 1 June 2024, subject to there being no variation to the contract. MDR will continue to apply to contracts which complete or are substantially performed prior to 1 June 2024.

If transactions are linked pre and post the change, then these transactions will not be linked for the purposes of MDR.

Whilst this relief is withdrawn, investors in residential property buying six or more dwellings in a single transaction will still be entitled to claim the benefit of non-residential rates of SDLT.

First Time Buyers (FTB) Relief
Where a first-time buyer was buying a new residential property via a nominee or bare trust to retain anonymity, it was the nominee or bare trust that was treated as the purchaser and therefore the FTB relief was not available.

This measure ensures that as from 6 March 2024, where someone needs to retain their anonymity (i.e. a victim of domestic abuse) and buy a home through nominee or bare trust arrangements, there is a level playing field and they are able to claim FTB relief.

Where contracts are exchanged prior to 6 March 2024, but complete or are substantially performed on or after that date, then transitional rules may apply.

Acquisitions by registered social landlords and public bodies
An exemption from SDLT existed for registered providers where purchases of social housing were partly funded by public subsidy. To support the provision of social housing the list of public subsidises that qualify will be updated and will remove uncertainty for some registered providers such as local authorities.  In addition, public bodies will be removed from the SDLT 15% higher rate charge which was targeted at companies purchasing residential property valued at over £500,000 for no commercial purposes. This will mirror the treatment of public bodies in relation to Annual Tax on Enveloped Dwellings (ATED).

Capital Gains Tax (CGT) on Residential Property Disposals
A cut in the higher rate (28%) of CGT to 24% to incentivise earlier disposals of second homes, buy-to-let property and other residential property not benefiting from other reliefs. This is seen as a driver to generate more transactions in the property market. The lower rate of CGT for any gain on residential property that falls within an individual’s basic rate tax band will continue to be taxed at 18%

Abolition of the Furnished Holiday Lettings (FHL) tax regime
As from April 2025, the FHL tax regime will be abolished which will eliminate the advantages for landlords who let out short term furnished holiday properties over those who let out residential properties to longer-term tenants.  The draft legislation will be published in due course together with rules to ensure that it will prevent obtaining a tax advantage through use of conditional contracts to obtain capital gains relief under FHL rules from 6 March 2024.

Whilst this is to be welcomed to provide a level playing field and much needed longer term lets in holiday destinations, it may create some uncertainty as whether a landlord simply has a passive investment or is conducting a “trade”. Where a property business meets the definition of a “trade” they could benefit from capital allowances and certain capital gains tax reliefs. We will have to wait for the draft legislation and subsequent guidance to see whether these areas have been addressed.

Capital Allowances
Following on from the full expensing and 50% first year allowance for special rate assets being made permanent in the Autumn Statement 2023, draft legislation and a technical consultation will be published to help consider whether plant and machinery for leasing should be included in these allowances.

Umbrella Companies
These companies are often used in the construction sector and the Government will shortly be publishing an update on their progress of work to tackle non-compliance in the umbrella company market.

Tax Administration
HMRC are keen to strengthen the regulatory framework in the tax advice market and have published a consultation on options and advisers registering with HMRC to act on a client’s behalf.

If you would like any advice on any of the above, please don’t hesitate to reach out to Paul Atkins, Partner and Head of Property Tax at patkins@haysmacintyre.com.

Click here to read our full Spring Budget 2024 summary.