Landlords, corporations – any entity who owns property will be aware of the ‘mixed bag’ of changes that have taken effect this year, affecting the returns on your property assets. Since the Spring Budget in March, there have been a series of changes to taxes introduced, and some tabled for the not-so-distant future. We can expect more changes to come with the new Labour Government, albeit once the dust has settled.
If you or your business owns property, be it commercial or residential, here’s everything you need to know about recent changes and what might be on the horizon.
Capital Gains Tax
As of April 2024, landlords and property owners have enjoyed the reduction of capital gains tax for residential properties, from 28% to 24%. After all – who wouldn’t want to pay tax on less of their profits! The aim behind this was to stimulate the housing market and convince more owners of second homes to sell up – and it might just have done the trick.
That said, it’s reasonable to expect that the Labour Government might make changes to Capital Gains Tax – and given their focus on the housing market, it might happen sooner rather than later. If you own a second property – this is definitely one to keep an eye out for.
Multiple Dwellings Relief
But where one hand gives – the other takes away. As of 1st June this year, the Multiple Dwellings Relief was scrapped. The then Chancellor Jeremy Hunt stated his reasons for doing so were because the relief was ‘regularly abused’ and HMRC stated that the relief was not doing what it should in terms of increasing investment in the private rental sector.
The scrapping of this relief means that those buying multiple properties in one transaction, will no longer enjoy the discounts given by only charging stamp duty on the average prices of the properties.
Furnished Holiday Lettings Tax
For those with businesses that involved furnished holiday lettings – April 2025 is the date when the tax breaks come to an end. The Furnished Holiday Lettings Tax Regime is to be scrapped from this date, and ventures previously taxed under this regime will be brough in line with longer-term rentals.
However there’s a small, silver lining in that you will no longer need to report the two income streams separately. If you’re in this situation, you need to be speaking to your Accountant now to ensure you’re making the most of any allowances and reliefs available elsewhere – to rectify what you’ll lose from the scrapping of this tax regime.
Post General Election – key advice
Whilst we’ll likely have to wait until the Spring Budget, or even the Autumn Statement, get a clearer idea of what changes are coming – they will be coming.
In Labour’s Manifesto, many of the taxes that affect property owners, including Capital Gains Tax, had not been mentioned. This does not mean that they won’t make changes. Quite the opposite.
The Shadow Chancellor has also been recorded as saying that a Labour Government will examine ‘every single tax break’ so we can expect to see the scrapping or amending of specific tax allowances across the board.
Our key advice for property owners in the wake of the new Labour Government would be:
- Reviewing your portfolio is key. Keep an eye on which assets are profitable and which have the potential to let you down.
- Make sure you have the right structures and business entity in place to maximise returns.
- We’re entering a period of increased scrutiny around limited companies, so be sure you’re on top of reporting requirements.
- Rental reform is likely to be reintroduced to Parliament in the coming years, including the scrapping of Section 21 evictions. Something to be aware of, depending on how your portfolio is structured.
- We are becoming increasingly aware that to maximise returns, individuals and businesses must take a holistic approach to how they structure their finances. Meet and speak with your Accountant to ensure you’re making the most of your portfolio.
If you’d like to speak to one of our team about your finances, get in touch here or call us on 01582 540800.