Chancellor Jeremy Hunt gave what will likely be his last Budget Statement before the next General Election. Which announcements will impact property investors, and does the Government plan to do enough for the Private Rental Sector?
Tax Announcements
Furnished Holiday Letting Tax Regime - Abolished
In a massive blow for property investors, Jeremy Hunt is abolishing the tax relief for holiday let landlords. Following the 2016 Section 24 tax relief changes for the PRS, the tax breaks offered on holiday properties were a significant draw to the sector.
Stamp Duty Relief for Multiple Dwellings - Abolished
The Stamp Duty Relief for those buying more than one dwelling is being abolished following claims from Chancellor Hunt that there’s no evidence it supports investment in the PRS (its intended purpose) and that it’s “regularly being abused”.
The Multiple Dwellings Relief (MDR) will be abolished starting 1st June 2024. Deals exchanged “on or before 6th March 2024 will continue to benefit from the relief [...] as will any other purchases that are completed before 1st June 2024.” (Investors Chronicle)
Capital Gains Tax – Rate Cut
In a bid to boost residential sale transactions (and tax revenue), the Government will reduce the higher rate of property Capital Gains Tax (CGT) from 28% to 24%.
Although probably not number one on most property investors' wish list of tax cuts, this surprise announcement will be a relief to those looking to offload low-performing investment properties.
National Insurance – Rate Cut
Widely rumoured in the weeks running up to the Statement, Hunt saved the headline 2p cut to National Insurance (NI) till the very end of his Budget Announcement.
From 6th April 2024, NI for PAYE employees will be reduced from 10% to 8%, a £450 annual saving for someone on an average salary.
For self-employed persons, NI is reducing from 8% to 6% and is an average £350 saving per year.
Hunt claims that, combined with the reductions he made in his 2023 Autumn Statement, this will be “an average tax cut of £900 a year” for 27 million employees and £650 for the self-employed.
Valued Added Tax (VAT) Threshold – Increased
For small businesses and self-employed people, the threshold for VAT registration will increase from £85,000 to £90,000.
The threshold has been frozen for seven years, and many hoped it would increase to at least £100,000, so this £5,000 rise will be considered too little by many.
“Nom-Dom” Taxes – New Rules
The Government will scrap the tax break for individuals who live in the UK but are not permanently settled here and, therefore, fall under a non-domiciled tax status.
From April 2025, new arrivals won’t be required to pay any tax on foreign income or gains for the first four years, but if they still live in the UK after then, they’ll be required to pay the same taxes as UK residents. Hunt claimed the new scheme will make it “fairer and competitive”.
Housing
Despite desperate calls from the public and industry experts alike, few announcements were made about how the Government plans to solve the housing shortage crisis.
Hunt said they were “on track to deliver 1 million new homes in this parliament” and acknowledged the need for more homes for “young people”.
Besides a £188 million budget for housing projects in Sheffield, Blackpool and Liverpool and a £242 million fund for 8,000 new homes in Canary Wharf, there were no other announcements on housing.
Regional Investment
The North-East trailblazer devolution deal will provide regional support “potentially worth over £100 million”.
The North-East is already a hotspot for property investors, and with more support offered to grow jobs and infrastructure in the region, it looks set to stay that way.
Cost of Living Measures
The Household Support Fund will be extended for another six months past the original 31st March 2024 deadline.
The funding helps councils offer vital services to low-income households through food banks, warm spaces, and food vouchers.
Many charities had called for a two-year extension due to the rising costs' severe impact on communities.
Initial Reaction
It’s fair to say that the Government has once again overlooked the importance of the PRS. Abolishing two of the few remaining tax reliefs for property investors – holiday let relief and MDR – is a huge blow.
While reductions to National Insurance and CGT are welcome, they are not the measures our sector needs to thrive and provide safe, affordable housing for those who need it.
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