Property tax changes aim to stimulate the market

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Chancellor Jeremy Hunt unveiled significant property taxes changes in his Budget statement, aimed at stimulating the market.

He announced both a capital gains tax cut and the abolition of tax relief on holiday lets.

The higher capital gains tax (CGT) rate on residential property, currently at 28 per cent, will be reduced to 24 per cent in a boost for landlords.

CGT on property sales is paid on non-permanent residences such as buy-to-lets, second homes and holiday lets.

Mr Hunt said both the Treasury and the OBR agreed that the move would actually increase tax revenues overall, as it would encourage more property sales.

The CGT property rate will remain the same for basic rate taxpayers at 18 per cent.

In a statement following the announcement, the government said: “Cutting the 28 per cent rate of CGT to 24 per cent is expected to incentivise earlier disposals of second homes, buy-to-let property and other residential property where accrued gains do not fully benefit from Private Residence Relief (PRR).

“This will generate more transactions in the property market, benefitting those looking to move home or get onto the property ladder.”

Meanwhile, the furnished holiday lets (FHL) regime, which offers tax advantages to those who let out a property as a holiday home, will be abolished in April 2025. The chancellor will also remove multiple dwellings relief.

Mr Hunt said FHL was being scrapped because holiday lets reduce the availability of long-term rentals for people.

Under the present rules, landlords can deduct the full cost of their mortgage interest payments from their rental income and potentially pay lower capital gains tax when they sell. Around 127,000 properties in the UK are registered under the FHL regime.

In other Budget announcements, a new excise duty will be introduced on vaping products from October 2026.

‘Non-dom’ tax status will be abolished and replaced with a residency-based system.

And a new tax-free British Isa will be created as part of efforts to encourage more investment in UK companies.

In a statement the Treasury said: “The new £5,000 allowance, in addition to the existing ISA allowance, will provide a new tax-free savings opportunity for people to invest in the UK, while supporting UK companies.”

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