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The UK Spring Budget 2024 was announced on 6 March and featured various plans for government spending and forecasts on the state of our economy.
Several of the new budget announcements significantly affect the property sector, such as the removal of tax advantages for holiday lettings and reductions to National Insurance (NI) contributions.
In this blog post, we discuss the key takeaways from the UK Spring Budget 2024 that small businesses should consider, with a particular emphasis on landlords and letting agents.
Budget summary specific to landlords, letting agents and property owners in the UK Spring Budget 2024
The buy-to-let company set up process is fairly simple, and you can do it yourself by registering with Companies House.
Capital Gains Tax (CGT) cut
One of the most important announcements in the UK Spring Budget 2024 related to reducing the higher CGT on property from 28% to 24% from 6 April. The standard CGT for basic rate taxpayers will remain the same at 18%.
With the lower tax rate, there will be estimated to be more property transactions and, thus, more tax revenue.
The Multiple Dwellings Relief has also been abolished, which could greatly impact buy-to-let landlords.
Abolishing of the Furnished Holiday Lettings (FHL) scheme
The Chancellor announced that the furnished holiday letting tax regime would be scrapped by April 2025 to combat the problem of local people not having enough properties to rent or purchase for themselves.
Essentially, going forward, short-term and long-term lettings will be treated the same for tax purposes. Under the FHL scheme, property owners had certain advantages, including:
- Claiming CGT reliefs that were normally only available to traders
- Being able to count rental profits as earnings for pension purposes
- Getting plant and machinery capital allowances for things like furniture and fixtures
As a result of the change, holiday landlords could lose an average of £2835, assuming a property purchase price of £400,000 and a mortgage rate of 4.5%.
In addition, the Welsh government announced a new licensing scheme in 2023, under which guest accommodation would have to meet some minimum requirements to be considered a holiday let property. The goal, again, is to support more full-time tenancy in tourist hubs.
Overall, it is estimated that the combination of lower CGT and abolished holiday letting tax relief might push more private buy-to-let landlords to sell their properties.
Incorporated companies, however, will not be affected that much. The potential Government revenue from these combined measures is about £600 million by 2028-29.
Two clear benefits from the UK Spring Budget 2024 that landlords and letting agents will appreciate
One is the deduction in National Insurance contribution from 10% to 8% of pay, and the other is the fuel duty freeze at 53p up to March 2025, which will benefit letting agents who drive around for their viewings.
Executive budget summary relevant to UK small businesses
Further cuts to NI contributions
The Chancellor has announced a further cut of 2% to NI contributions. The financial benefit of this to individuals is offset by no inflationary uplift to personal allowance bands.
New guidance on tax deductibility
HMRC has released a fresh set of guidelines around the tax deductibility of training costs by the self-employed.
The guidelines state that necessary training to update one’s skill set and stay on top of technological or industry advancements is an allowable expense when calculating taxable income.
VAT registration threshold increase
The Chancellor stated that the income threshold for mandatory VAT registration would be increased from £85,000 to £90,000 from 1 April, which smaller independent businesses and agencies will likely welcome.
The VAT deregistration threshold has also been increased from £83,000 to £88,000 from the same date onwards.
Increase in Air Passenger Duty (APD)
APD for flyers in premium economy, business and first class will be increased to adjust for inflation rates, while the duty for the standard economy will remain unchanged.
Recovery Loan Scheme (RLS) extended
The RLS allows a 70% government guarantee on loans of up to £2 million (£1 million in Northern Ireland) taken by a small business.
This scheme was introduced to help small businesses acquire vital financial support to overcome the impact of the COVID-19 pandemic. The UK Spring Budget 2024 announced that it would be extended to March 2026. It is also being renamed the Growth Guarantee Scheme.
Commitment to build one million homes
The UK Spring Budget 2024 allocated £242 million to building new housing, in line with the Conservative Party’s commitment to build a million homes by the conclusion of Parliament.
These houses will mostly be in areas like Sheffield, Liverpool, Cambridge, Blackpool, and the Canary Wharf area of London.
High-Income Child Benefit Charge threshold
From 6 April 2024, the threshold will increase from £50,000 to £60,000, which is excellent news for parents. The taper range will also increase from £60,000 to £80,000. This is the income level above which any child benefit taken needs to be repaid in full.
Launch of the new Individual Savings Account (ISA)
A new ISA has been announced in the UK Spring Budget 2024 to encourage more investments by UK savers. In addition to the current ISA allowance of £20,000, there will be an extra allowance of £5,000.
Final words
Based on the UK Spring Budget 2024 announcements, it is fair to assume that there is a push towards buy-to-let landlords to sell more.
Holiday lettings have also become less attractive investments, which could be good news for those who want to live locally in their hometowns but could reduce tourism income.
Ultimately, if you are a landlord or letting agent, it is essential to talk to your accountant about exactly how these changes will affect your business and to pivot your strategy if necessary.
Navigating the tax landscape can often feel daunting. Having a dependable partner like Golding Accountancy to guide you through this maze is vital to ensure you remain compliant and steer clear of any potential penalties or fines.
Our seasoned experts are equipped to offer personalised recommendations and strategies to meet your unique requirements, helping you easily manage the intricacies of the tax system. Please feel free to contact us for any assistance or support.
