Will the pincer efforts of Jeremy Hunt in his Spring Budget 2024 announcement lead to second homeowners and landlords kickstarting the residential property market by selling their additional properties?
The government is set to dismantle the Furnished Holiday Lettings tax scheme. This decision levels the playing field, removing the tax advantage previously enjoyed by landlords who rented out short-term furnished holiday properties over those catering to longer-term tenants in residential properties. The implementation of this change is slated for April 2025.
Upcoming legislation will feature an anti-forestalling provision aimed at preventing individuals from exploiting unconditional contracts to gain capital gains relief under the existing FHL regulations. This safeguard came into effect on 6 March 2024.
Jeremy Hunt also announced in his budget speech that the government plans to introduce a reduction in the higher rate of Capital Gains Tax for gains on residential propertie, bringing it down from 28% to 24% in the upcoming Spring Finance Bill 2024. This adjustment will be effective from 6 April 2024, with the lower rate remaining at 18% for gains falling within an individual's basic rate band.
These strategic manoeuvres signal a clear call to action for second homeowners and landlords to consider selling their extra properties. With a substantial number of over 2.1 million households reported having at least one second property, many of which lie unoccupied for extended periods, the time seems ripe for these homeowners to reassess their holdings and potentially inject fresh energy into the sluggish residential property market.
Local authorities' initiatives to raise Council Tax on second homes in popular holiday destinations may further incentivise this reevaluation, could we see a glut of new properties on the market?
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Resources:
Spring Budget 2024 — Overview of tax legislation and rates (OOTLAR) - GOV.UK (www.gov.uk) See 1.4 & 2.7
English Housing Survey 2021 to 2022: second homes - fact sheet - GOV.UK (www.gov.uk)
