Navigating the new tax landscape

What the Spring 2024 budget means for property owners

Now that the Spring Budget has been announced by Chancellor Jeremy Hunt we thought it was a good idea to break down the implications of these changes, and how they may sway our property decisions.

Stamp Duty and Land Tax –

One of the most significant shifts in the budget is the elimination of Multiple Dwellings Relief for Stamp Duty liability, scheduled to kick in on 1st June 2024. This relief, which had been in place since 2011, aimed to spur investment in residential properties by offering a reduced Stamp Duty rate for buyers acquiring multiple residential properties in one fell swoop or a series of linked transactions. However, after over a decade in action, HMRC’s research indicates that it largely failed to achieve its intended purpose and was often exploited.

So, what’s the impact?

For those purchasing a single dwelling, this change won’t make a dent. However, for buyers buying two or more residential properties in one go, prepare for an increase in Stamp Duty.

While this might pinch the pocket for some, it’s worth noting that according to HMRC’s findings, only a small percentage of buyers were even aware of Multiple Dwellings Relief. Plus, if you’ve already exchanged contracts or plan to complete your transaction before 1st June 2024, you’re in the clear from this change.

Capital Gains Tax – Lowering the Bar

Another eye-brow raiser from the Chancellor is the reduction of the upper limit of Capital Gains Tax from 28% to 24%, effective 6th April 2024. Capital Gains Tax, which applies to the sale proceeds of certain assets, including residential properties within a portfolio, will see its lower rate of 18% remain untouched for gains within the basic rate band.

This move aims to inject vigour into the residential property market by incentivising landlords and second home-owners to offload their properties, thereby opening up the market for first-time buyers. Notably, Private Residence Relief will continue to shield those selling properties they’ve called home for the entirety of their ownership, exempting them from Capital Gains Tax.

How does this play out for you?

If you’re a higher or additional rate taxpayer selling a second residential property, your Capital Gains Tax bill will shrink from 28% to 24%. But if you fall within the basic rate tax bracket, the rate remains unmoved at 18%. And remember, if you’re saying goodbye to your primary residence, you’re in luck – Private Residence Relief has got your back, ensuring that you won’t be paying a penny in Capital Gains Tax.

In essence, these changes usher in a new era of consideration for property transactions. Whether it’s wrapping your head around Stamp Duty adjustments or leveraging the tweaks in Capital Gains Tax, staying clued in is paramount to smart property dealings. At Bernards, we’re here to help you navigate these waters and make informed choices for your property ventures.