In the 2024 Spring Budget delivered by Chancellor Jeremy Hunt, several key announcements were made with potential impacts on homeowners and those aspiring to buy a home in the UK. Amidst various fiscal policies and adjustments, the budget focuses on stimulating long-term growth, with particular attention to the property sector and housing market.
Capital Gains Tax
One of the noteworthy announcements was the reduction of the higher rate of Capital Gains Tax on property sales from 28 percent to 24 percent. This change could potentially encourage more property transactions, making it slightly more financially appealing for sellers and possibly increasing the supply of homes on the market.
Scrapping Tax Breaks for FHLs
The Chancellor also made a significant move to scrap tax breaks for second homeowners who let out their properties to tourists. This decision targets the furnished holiday letting (FHL) regime, which allowed landlords to deduct full mortgage interest payments from their rental income and, in some cases, pay lower capital gains tax upon selling. By abolishing this regime, the government aims to tackle the housing shortage in popular areas, potentially improving the availability of long-term rentals. This measure is expected to affect around 127,000 properties previously benefiting from the FHL regime.
This strategic shift in tax policy is expected to have a meaningful impact on the property market, encouraging homeowners to transition their investments from short-term holiday lets to long-term rentals or to sell properties to potential homeowners. By doing so, it not only addresses the issue of housing scarcity in key areas but also supports the broader objective of making homeownership more accessible to a larger segment of the population. This move has been welcomed by many who see it as a step towards rebalancing the housing market and providing more opportunities for local residents to own a home.
No Changes to Stamp Duty
Despite these changes, there was no mention of cuts to Stamp Duty, the introduction of 99 percent mortgages, or adjustments to Lifetime ISAs that had been speculated as measures to assist first-time buyers more directly. The absence of these measures means that while the budget includes significant policies affecting the housing market, direct support for first-time homeowners was not as prominent as some might have hoped.
Recession
Additionally, the budget comes at a time when the UK economy has entered a recession, with the economy shrinking in the last quarter of 2023 and the first quarter of 2024. This broader economic context might influence the housing market and prospective homeowners’ decisions, despite the specific measures introduced in the budget.
These initiatives reflect the government’s efforts to address the property market’s complexities and the challenges faced by homeowners and prospective buyers. The reduction in Capital Gains Tax and the scrapping of tax perks for certain landlords indicate a move towards making the housing market more equitable and addressing long-term rental shortages in key areas. However, the lack of direct measures for first-time buyers suggests that those looking to enter the housing market may need to explore other avenues for assistance or wait for future policy developments.
For any help and advice with getting on the housing market, get in touch with our team at Home EA today.
