How Could the Spring Budget Affect Me?

Last week saw Chancellor Jeremy Hunt deliver what could be his last Budget in this government but what did it all mean for the housing market and you?

Unfortunately, not a lot.

Despite Hunt telling MPs that his plans will create a ‘budget for long-term growth’ as well as new measures for  ‘more investment, more jobs, better public services, and lower taxes’ for the housing market it was more of a missed opportunity.

Tax Cutting Budget

In what was seen as a tax-cutting Budget, he cut National Insurance from 10% to 8%, which he said would give the average worker £450 per year.

Measures aimed at supporting the housing sector were widely expected to include proposals for a 99% mortgage scheme, a cut to inheritance tax and stamp duty relief for downsizers.

But none of that happened in any meaningful way with a distinct lack of significant proposals to support homeowners and the UK property market. 

However, some experts argue that the Chancellors’ willingness not to prop up the housing market could lead to some as yet unseen benefits.

A lack of first-time buyer intervention could at least lead to house prices stabilising and potentially becoming more affordable.

Token Gifts

Of course, there had to be a few token gifts. On Capital Gains Tax on property, the Chancellor reduced the top rate from 28% to 24%, which he said would bring in more money as it will cover more transactions.

Indeed, a reduction in capital gains tax might well see a boost in property transactions as some buy-to-let investors take advantage of the lower rate but at the same time they were slapped with the abolishment of the Multiple Dwelling Relief.

Second Homeowners

And a tax break for second homeowners who let out their furnished properties to holiday makers was also axed, amidst claims that it was depriving long-term renters of affordable accommodation. 

Currently, interest incurred on loans for the purpose of a furnished holiday letting business are treated as a deduction from rental income in calculating taxable profits of the business.

But from 6 April 2025, interest for businesses operated by individuals will cease to be a deduction and relief will instead be given as a 20% tax credit from the individual’s tax liability. For higher rate taxpayers, this will mean a reduction in tax relief for interest to the 20% rate. 

Paul Falvey, tax partner at accountancy firm BDO, explains: “While owners of furnished holiday lettings are set to lose some significant tax benefits from April 2025, those who choose to sell their property after 6 April 2024 will be able to benefit from the reduction in the higher rate of CGT for residential property gains which is due to drop from 28% to 24%.

“These tax changes make it less attractive to own holiday lets and more attractive to sell them. The chancellor is clearly hoping that this will lead to significant numbers of property owners putting their holiday homes on the market in the 2024/25 tax year.”

Whether this leads to a significant increase in the availability of rural homes to buy or longer-term residential lettings remains to be seen.