The higher capital gains tax (CGT) rate on residential property, currently at 28 per cent, will be reduced to 24 per cent. CGT on property sales is paid on non-permanent residences such as buy-to-lets, second homes and holiday lets. The 18% rate for gains on residential property disposals that fall within the basic rate band will remain unchanged.
Meanwhile, the furnished holiday lets (FHL) regime, which offers tax advantages to those who let out a property as a holiday home, will be abolished in April 2025. The Chancellor said this is because holiday lets reduce the availability of long-term rentals for residents. At the moment, landlords who use the furnished holiday lets regime can deduct the full cost of their mortgage interest payments from their rental income and potentially pay lower capital gains tax when they sell. About 127,000 properties in the UK are registered under the FHL regime.
Meanwhile, the furnished holiday lets (FHL) regime, which offers tax advantages to those who let out a property as a holiday home, will be abolished in April 2025. The Chancellor said this is because holiday lets reduce the availability of long-term rentals for residents. At the moment, landlords who use the furnished holiday lets regime can deduct the full cost of their mortgage interest payments from their rental income and potentially pay lower capital gains tax when they sell. About 127,000 properties in the UK are registered under the FHL regime.
The combination of the two policies could be seen as another move to push private landlords out of the market. The removal of the relief, plus the further incentive to sell up and pay a lower CGT rate, could see rental properties come onto the market. However, those incorporated as a limited company will be unaffected. Budget documents have said the two policies combined would raise £600mn by 2028-29.
In the accompanying policy paper, the government explained that the change is “expected to incentivise earlier disposals of second homes, buy-to-let property and other residential property where accrued gains do not fully benefit from private residence relief (PRR). This will generate more transactions in the property market, benefitting those looking to move home or get onto the property ladder.”
The immediate impact is likely to be a delay in some residential sales in order to benefit from the lower rates. The Budget costings show an estimated loss in income in 2023/24 of £70m, before additional revenue increases in future years.
Urging Government to support landlords
We’re committed to using our size and scale to influence policy and Government to help shape the wider rented sector for the better. Take a look at the six key actions we’ve highlighted, which could be taken by Government to deliver a thriving private rented sector.
The immediate impact is likely to be a delay in some residential sales in order to benefit from the lower rates. The Budget costings show an estimated loss in income in 2023/24 of £70m, before additional revenue increases in future years.
Urging Government to support landlords
We’re committed to using our size and scale to influence policy and Government to help shape the wider rented sector for the better. Take a look at the six key actions we’ve highlighted, which could be taken by Government to deliver a thriving private rented sector.