In the Spring Statement, the chancellor has announced several significant changes that will affect the property market. These include a reduction in Capital Gains Tax (CGT) and the removal of Stamp Duty Land Tax (SDLT) relief for multiple dwellings.
Capital gains tax reduction
The chancellor has announced that the government will reduce the higher rate of property capital gains tax from 28% to 24%. The reduction has been instated with a view to increase revenues due to more property transactions.
Regeneration schemes
The chancellor has also highlighted two new regeneration schemes in the Spring Budget. Hunt has pledged to transform Barking Riverside and Canary Wharf with £242 million of investment, alongside investments in Blackpool, Sheffield and Liverpool.
He commented "Together [this] will build nearly 8,000 houses as well as transforming Canary Wharf into a new hub for life science companies.” The government will also launch a new £20 million Community Led Housing scheme helping local communities to deliver developments.
Commenting, Adam Stackhouse, Managing Director, Developments and Commercial Investments at Winkworth, said: "The Government has identified the astonishing decline in Canary Wharf as a viable property investment for the future. This substantial ‘levelling up’ fund of almost a quarter of a billion pounds is vital in re-purposing many half-empty office buildings and providing up to 8,000 homes in this area and Barking Riverside also. This looks very promising, and we hope it will serve as a successful template to re-purpose increasingly redundant business districts across the UK into much needed residential homes.”
He continued, “However, it seems clear to me that these are short term attempts to fix the problem of housing supply rather than making use of the Housing Committee to galvanise the UK into a country that builds homes to suit the needs of its population. National Insurance reduction is indeed encouraging by putting more money into the pockets of the population, but this is unlikely to be enough to get the economy moving at the right pace when housing supply is in such dire need. We continue our call for a ‘National Planning Team’ to be parachuted into local government to solve this damaging issue."
Abolition of non-dom tax status
The chancellor has announced the abolition of non-dom tax status, to be replaced by a ‘modern, simpler and fairer’ system starting from April 2025. Currently enjoyed by individuals who live in the UK with overseas ties, non-dom status exempts them from paying UK tax on worldwide income. Under the new system, after four years of residence in the UK, they will be subject to the same tax rules as other residents. Although removing tax advantages for non-domiciled individuals may be well-received by some, it could have an adverse effect on cities like London, which rely on investment from overseas to support the local economy and property market.
Commenting on the non-dom tax status, Dominic Agace, Chief Executive of Winkworth said, “We must continue to encourage a global London to attract international buyers to invest and/or live here – avoiding punitive moves that will affect the delicate balance of the market and all the suppliers and services which benefit from high-net-worth buyers. Many house builders rely on international investors buying at an earlier stage to ensure the viability of a scheme. The investors also contribute to the homes available for private renters.”
Abolition of multiple dwellings relief
The chancellor has also announced the abolition of stamp duty relief for those buying more than one dwelling. Hunt claims that an external evaluation found no strong evidence that the tax relief was supporting the private rental sector and that the regime was being abused regularly, leading to his decision. This will change will take affect from 1st June 2024.
Abolition of furnished holiday lettings tax relief
The chancellor will scrap tax breaks which make it more profitable for second homeowners to let out their properties to holiday makers rather than to long-term tenants to rent. Hunt claims that the Furnished Holiday Lettings tax regime has resulted in a lack of long-term rentals being available for local residents, leading to his decision to abolish the tax.
