Furnished Holiday Lets
The government will abolish the Furnished Holiday Lettings (FHL) tax regime, so removing the tax advantage for landlords who let short-term FHL properties over those who let residential properties to longer-term tenants.
The tax advantages of operating an FHL will all now be removed, including:
- The exemption from finance cost restriction rules;
- The beneficial capital allowance rules;
- The access to reliefs from Capital Gains Tax (CGT); and
- The inclusion of relevant UK earnings when calculating maximum pension relief.
This measure will take effect from 6 April 2025 for Income Tax and CGT, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.
This measure is expected to raise £600m in additional taxes by April 2029.
Stamp Duty Land Tax
Multiple Dwellings Relief (MDR)
MDR was a particularly contentious issue with HMRC and is now being abolished. Ordinarily, Stamp Duty Land Tax (SDLT) is payable on the total value of a transaction. However, where two or more dwellings are purchased in a single or in linked transactions, Multiple Dwellings Relief (MDR) may be claimed.
MDR reduces the rate of SDLT payable on a transaction involving the purchase of multiple dwellings so that the SDLT is closer to that which would be payable had those dwellings been purchased in separate transactions from different vendors.
From 1 June 2024, MDR will be abolished.
Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024.
This measure is expected to raise £1,315m in additional taxes by April 2029.
Mixed-Property Purchases
Mixed-property purchases are transactions that consist of both residential and non-residential property.
The mixed-property rules take transactions, including for example purchases of a pub with a manager’s flat, a farm including a farmhouse or a row of shops with flats above, out of the scope of residential SDLT. Instead, the commercial rates of SDLT apply on the entire transaction, which typically produces a lower SDLT burden.
Whilst such purchases are now under review, the government will not introduce apportionment for mixed property purchases at this time, and no other changes to the mixed property rules are planned.
Capital Gains Tax
From 6 April 2024, the higher rate of CGT for residential property disposals will be cut from 28% to 24%. The lower rate of CGT will remain at 18% for any gains that fall within an individual’s unused basic rate band.
This measure is expected to raise £690m in additional taxes by April 2029.
Where CGT is payable on the sale of a residential property, reporting continues to be required within 60 days of completion – please click here to view our factsheet on this subject.
