Property: Budget Boost

Talking Points Budget Boost

Property Talking Points:
Budget Boost?

What the Spring Budget means for property

Words by Sophie Hampton

Our experts unpick last month’s Spring Budget and its likely effect on the London property market  

Homeowners, landlords, and investors alike will have had a keen eye on last month’s Spring Budget. Looking beyond the headlines, what will the contents of that iconic red dispatch box really mean for Londoners in the property game? David Fell, senior analyst at Hamptons says: “Property didn’t take centre stage in the Spring Budget, but there were still three housing market-related announcements. While they’re unlikely to change the medium-term market outlook, they will make a material difference to a small number of people in particular markets.

“Firstly, from April 2025, holiday lets will be taxed in the same way as buy-to-let investors. This aims to stem the loss of homes from the longer-term rental market. Almost all owners of furnished holiday lets will now be liable to pay Capital Gains Tax. While higher-rate owners will also no longer be able to offset all their mortgage interest against their tax bill. For the average holiday let, this likely equates to an extra £1,000 a year in tax payments.

“The Budget delivered a
mixed bag for landlords,
property investors
and others wanting
a sustained recovery”

Marc von Grundherr, Benham & Reeves

“Secondly, the Chancellor lowered the higher rate of Capital Gains Tax rates from 28 per cent to 24 per cent starting in April. This means the average landlord who is also a higher rate taxpayer will see a reduction in their average Capital Gains Tax bill of £3,300 when they sell. Alone, this change is unlikely to have a material impact on investor behaviour, but alongside other tax hikes, it provides a small carrot for landlords who have got used to progressively larger sticks.

“And finally, Multiple Dwellings Relief was abolished, a tax break often claimed by anyone bringing run-down homes back into use or purchasing homes from housebuilders destined for the rental market. It offered stamp duty savings to those purchasing two or more properties in a single transaction by calculating the tax bill on the average value of the homes. Now abolished, SDLT will be paid on a per-property basis.”

Marc von Grundherr, director at Benham & Reeves describes last month’s Spring Budget as “lacklustre”, with both good and bad news for property investors. “The Budget delivered a mixed bag for landlords, property investors and others wanting a sustained recovery in the British economy,” he says. “The good news for the property sector revolves around a cut in Capital Gains Tax on property from 28 per cent to 24 per cent – although ironically, this will give most benefit to landlords selling their properties. Also welcome is a substantial £242 million of investment in Barking Riverside and Canary Wharf. Here, the Chancellor says, nearly 8,000 homes will be built ‘as well as transforming Canary Wharf into a new hub for life science companies’. “

However, this is tempered by several less favourable announcements. The government is scrapping so-called Non-Dom tax arrangements under which non-UK citizens had paid UK tax only on their UK earnings, not on those from elsewhere. This is widely considered to be a measure which may deter wealth creators from living in the UK, and therefore, contributing to the prime and super-prime residential sectors, especially in London. Overall, these sectors’ economic contribution is significant, generating over £36 billion across some 16,000 transactions last year.  “

Also disappointing to the property industry is the confirmation that tax breaks for those letting out furnished property as holiday and short lets will be ended – this is described as a bid to urge investment property owners to shift their units to the long term rental market. However, it may be seen as a disincentive to invest in the first place, putting off people thinking about buying a rental investment property. With only around seven per cent more property for sale available than there was a year ago (according to Zoopla), the Budget contained some feel-good announcements to appease voters, but it didn’t really do much to boost a limping housing market.”