Spring Budget 2024: Impact on Property Market

Scrapping Tax Breaks for

Short-term Lets

In tourist locations, long-term rental options are limited. Therefore, to increase the availability of long-term rental accommodation, Jeremy Hunt announced the removal of tax relief for short-term furnished holiday lets. This move aims to align short-term and long-term lets for tax purposes and will be effective from April 2025. This will eventually improve the supply-demand imbalance across the market, predominantly in tourist spots.

Currently, short-term let owners can claim capital gains tax reliefs, as their profits can count as earnings for pension purposes. But from April 2025, the tax advantage for landlords who let short-term properties will be eliminated. Making it easier for landlords to offer long-term tenancies, which encourages more landlords to do so. In simple terms, there will be no tax advantage on short-term lets over long-term tenancies. 

Reducing Rates

Reduction in Capital Gains Tax

The Chancellor has also announced in the Spring Budget that there will be a reduction in capital gains tax. This will benefit individuals with property portfolios.

The reduction of the rate of capital gains tax has gone down from 28% to 24%, this change was made hoping to encourage more property transactions. This means investors will not pay as much tax on the gains they make leading to a larger profit margin. The move aims to encourage more people to invest in property with the promise they can keep more of their returns.

Inflation Declining

House prices usually stagnate when inflation increases. Due to people not being able to afford property, the competition is not as strong. However, inflation has decreased to 4% and the government is still supporting the Bank of England to keep reducing this. It is predicted we will reach the government’s target of 2% in only 2 months. Due to this, wages are rising, the OBR now expects living standards to rise by 0.8%. This will lead to more people being able to step into the property market again. As competition increases, property prices will rise, benefitting investors.