Principally, Tuesday’s budget affects three areas of the Cotswold residential property market, Multiple Dwellings Relief, Capital Gains Tax and Furnished Holiday lettings.

SDLT Multiple Dwellings Relief has provided a tax benefit for purchasers of properties that align with HMRC requirements. Whilst the abolition of this Relief, affecting completions from 1st June 2024, will result in the loss of a tax advantage, it does not affect a large percentage of property transactions. Ancillary accommodation should continue to be viewed as both a good investment and source of income generation.

Mixed Use Relief remains unchanged.

The reduction in the Capital Gains Tax payable on secondary homes from 28% to 24% is a straightforward incentive for sellers and buyers, designed quite simply to increase the level of transactions, and thereby generate greater revenue for the Government. In turn this will support and engender greater confidence in the residential market. With changes to the residential rental markets, including holiday lets, this may also incentivise landlords to sell their investment properties.

Currently second home owners, under the Furnished Lettings Scheme, can deduct the full cost of their mortgage interest payments from their rental income.  These landlords can also qualify for Business Asset Disposal Relief, which reduces the Capital Gains Tax payable to 10% when selling their holiday let property. 

The announcement abolishing the above tax advantages, taking effect from April 2025, is likely to have an impact on the cash flow on holiday let landlords, however there is  little time for landlords to assess the impact these changes will have.

In general terms, with inflation at half its levels at the start of last year, and the realistic prospect of a further reduction again to around 2%, coupled with the sustained and further anticipated decline in interest rates, we can expect the confidence we are already witnessing here, in the Cotswolds, to be maintained through the spring and summer of this year. There is no doubt that buyers are back in the market. We have seen a rise in offers and transactions in the past few weeks, and have good stock to launch this spring.

For all advice on taxation matters, Butler Sherborn recommends that advice is sought from a qualified, specialist Tax advisor.

 

Image credit: Simon Walker / No 10 Downing Str

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