Spring Budget 2024: What Does it Mean for the UK Residential Market?
There were changes to stamp duty relief rules, non-dom regulations and holiday lets but nothing for first-time buyers.
4 minutes to read
This didn’t feel like the last Budget before a general election.
In much the same way as anyone trying to arrange a mortgage, the government had less room for manoeuvre than it thought it had two months ago thanks to rising borrowing costs.
Which was probably the reason there was no support announced for buyers with smaller deposits - remember the ‘99% mortgages’ idea being floated in the media a few weeks ago? Or any move to make stamp duty relief for first-time buyers permanent – it currently runs out in March 2025.
Such measures may come later this year.
So, what were the key headlines for the UK residential market?
Multiple Dwellings Relief
First, multiple dwellings relief (MDR) for stamp duty will be abolished this year. The rules mean that stamp duty relief can be claimed when buying more than one property.
Preventing the relief from being claimed in respect of properties with annexes wasn’t the most surprising announcement that Jeremy Hunt made, having previously published a consultation to reform the rules, but abolishing it entirely was.
There is a deadline of 1 June for completions (unless the exchange took place on or before 6 March). This may already start to bring forward completion dates for affected transactions.
However, the so-called ‘rule of 6’ will continue to apply, which means the purchase of six or more dwellings in a single transaction will continue to be taxed at commercial rates.
There was previously a choice as to whether the buyer treated these six-plus deals as commercial or residential with MDR.
“That option disappears on 1 June,” said Sean Randall, stamp duty partner at Blick Rothenberg. “Where six or more dwellings are purchased, the tipping point where it is generally better to pay stamp duty at the commercial rates is where the average price per dwelling is £250,000 or more.”
“Below that threshold, at a time when the government is trying to ensure the delivery of more homes, it is an anomaly of the new rules that investors in build-to-rent and student accommodation schemes, for example, could now pay more stamp duty, swapping an effective tax rate as low as 1% for one that’s almost 5%.”
Non dom rules
Second, non-dom rules will be scrapped from next April. To date, those with non-dom status have not paid tax on their worldwide income for up to 15 years under a fairly complex set of rules, making the UK somewhat of a global outlier.
From next year, new arrivals will pay nothing for four years before paying the same as other UK residents, a simplification the government has said will raise £2.7 billion a year by 2028/29. There were 69,000 non doms in the tax year ending in 2022.
For the prime property market, one part of the new rules could be of particular interest:
“The government will also offer a two-year Temporary Repatriation Facility for individuals who have paid tax on the remittance basis prior to 6 April 2025 to bring previously accrued foreign income and gains into the UK at a 12% rate of tax. This facility is expected to bring in an additional £15 billion of foreign income and gains onshore to the UK and raise over £1 billion in additional tax receipts.”
That 12% tax rate could see an injection of overseas capital into the UK from next April.
So, while the number of individuals coming to the UK could ultimately reduce as the tax-free window narrows and comes into line with other countries, expect a jump in cross-border capital into the country, particularly in the short-term.
Encouraging landlords to sell
Elsewhere, the government ended tax breaks for landlords of holiday lets in an effort to turn more of these properties into long-term lets. It also announced that capital gains tax for residential property will fall to 24% from 28% for transactions after 6 April this year, which is not a big cut but good news for landlords who have become used to tax rises.
The move was actually designed to encourage more landlords to sell, which depending on their taxable gains, some will do. It seemed to rather miss the point that fewer landlords will put more upwards pressure on rents, though.
If the government wants to make life easier for tenants against a backdrop of dwindling supply and fast-rising rents, abolishing the 3% stamp duty surcharge paid by landlords would be a good start. Perhaps not the easiest sell in an election year admittedly.
Chancellor Jeremy Hunt also announced further tax breaks to help the UK’s film and high-end TV industry.
Given that it should boost rental demand, particularly in London and the south-east, I just hope all those Hollywood stars can find somewhere to rent as they come over in greater numbers.
The full Budget document can be found here and we will provide further updates in coming days.