The recent adjustments in the 2024 Spring Budget bring forth noteworthy changes that hold implications for property investors and developers. As professionals in the sector, it is crucial that we are aware of these modifications to adapt strategies effectively and safeguard our plans for the future.
Below is a brief breakdown of the major changes from the spring budget that will affect property investors.

Furnished Holiday Lettings Regime - Elimination of Mortgage Interest Expense Relief:
One notable change in the budget is the abolition of the Furnished Holiday Lettings regime, resulting in the removal of mortgage interest expense relief for individuals. This alteration underscores the need for investors to reassess their financial models and plan for adjusted cash flows. The favourable tax treatment for furnished holiday lets will no longer be available starting April 2025. This change will have several impacts:
Mortgage interest relief will be aligned with residential Buy-to-Let (BTL) properties, treating mortgage interest as a basic rate credit for tax purposes rather than a business expense.
Tax relief on the initial furnishing of the property will no longer be claimable.
Capital Gains Tax (CGT) rate will increase from 20% to 24% for higher-rate taxpayers, bringing it in line with disposals of residential lets.
Removal of "business asset" tax breaks, including roll-over relief, will be implemented.
Multiple Dwellings Relief (MDR) Stamp Duty Regime: An End to Bulk Transactions:
The scrapping of the Multiple Dwellings Relief (MDR) stamp duty regime impacts property investors and developers involved in bulk transactions. Although this change does not affect the majority of investors, it does emphasise the importance of reviewing acquisition strategies, considering the implications on transaction costs and overall project profitability for the more experienced developers.
Multiple Dwellings Relief (MDR) was introduced in 2011 to encourage investment in residential property and boost private rented sector (PRS) housing supply. This is being abolished from June 1, 2024.Â
A HMRC evaluation found little evidence that MDR significantly supports residential property investment or overall housing supply. The scrapping of the Multiple Dwellings Relief (MDR) stamp duty regime impacts property investors and developers involved in bulk transactions.Â
Although, this is not all bad news for the larger developers, one thing to consider, which has not changed are the commercial property Stamp Duty rates. Where buying six or more residential dwellings under a single transaction is considered a commercial transaction, lower stamp duty rates do apply and can still be taken advantage of.
Capital Gains Tax Reduction: A Positive Shift for Property Investors:
On a positive note, the reduction of Capital Gains Tax from 28% to 24% provides a favourable environment for property investors. This adjustment could potentially enhance returns on investment, encouraging strategic decision-making in the property market.
This sounds great, but there is always a caveat. It's essential to be mindful of the timing regarding Capital Gains Tax (CGT) when selling a property. The CGT allowance reduction from £6k to £3k is a factor to consider and most definitely mitigates the savings made. Even so, remember that the CGT is triggered on the date of exchange, not completion, so aim for exchanges after April 6th to maximize your savings. I know that is easier said than done...
Continued Capital Allowances Regime: Maximizing Capital Expenditure Benefits:
The continuation of the capital allowances regime, allowing the full expensing of 100% of capital expenditure on plant and machinery, remains a beneficial aspect for property developers. This measure encourages investment in essential assets, contributing to the development and improvement of properties.
VAT Threshold Increase: Business Registration Adjustments:
The increase in the VAT threshold for business registration from £85,000 to £90,000 annually signals adjustments in financial planning for property-related businesses. Professionals need to reassess their VAT obligations in light of this change but the ongoing argument here is that these thresholds should be index linked.
Unaddressed Issues: Commercial Property Relief & 99% Mortgages:
Notably absent from the budget were measures addressing commercial property relief and business rates, leaving uncertainties in these areas. The complexity surrounding these aspects persists, demanding vigilance and potential advocacy for future reforms.
99% mortgages were due to be discussed in this budget but did not make the cut after receiving considerable backlash. More on this here.
Pending Consultation: New Permitted Development Right:
Although a promised consultation on a new permitted development right to split a single dwelling into two has yet to be issued by the government, property professionals should stay attuned to potential changes in this aspect. We cover the new PD rights in our previous article. Click here to get some more information on this.
It is worth noting, that although turning a house into two flats sounds like a great opportunity, as always, your GDV (End value) needs to be considered. Ensure that the figures stack, where the additional development time/costs are factored into your due diligence.
Missed Growth Opportunities:
Reduced VAT & Economic Stimulus Measures:
Regrettably, measures aimed at stimulating economic growth, such as a reduced flat rate of VAT on householder renovations and extensions, were not implemented.
This absence may impact the construction and renovation sectors whereby it has been estimated that reducing the flat rate of VAT to 5% across refurbishment projects would boost the UK economy by £50 billion and create 300,000 jobs in the construction sector.
Stamp Duty Land Tax Impact: Rent Escalation in High-Value Areas:
One factor that significantly encourages growth in the economy is people moving home. Entering the the property market, upsizing, downsizing or moving location all generates growth. With interest rates being so high, the cost of moving is increased and so people are moving less. In addition to this, the punitive nature of stamp duty in high-value areas continues to influence the property market, where only 4% of properties are exempt from stamp duty in London.
This is leading to decreased rental stock within London as buying a property to let out requires an additional 3% stamp duty. This leads to subsequent rent rises in & across the country and is a cost Investors must factor when assessing investment opportunities.
Modelling carried out by Capital Economics shows that the scrapping of the 3% surcharge on additional properties for letting presents a potential catalyst for growth. This move could result in 900,000 new private rented sector homes, offering a significant boost to the treasury of £10 billion in additional revenue.
In conclusion, the changes and omissions in the 2024 Spring Budget will undoubtedly have a profound impact on property market, but things have been missed! Opportunities to generate additional revenue and overcome shortages have been skipped passed. In the meantime, staying informed and adapting strategies accordingly is imperative for navigating these shifts successfully.
So what do you think? How do the changes made affect your property investment strategies? What are your plans going into Q2?
I would love to hear it! Reach out today to share your thoughts.
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