Spring Budget 2024 - Real Estate
On 6 March, the Chancellor delivered his Spring Budget which is expected to be the last fiscal event before the General Election. With that in mind, and as suspected, it wasn’t a Budget focused on business tax announcements, but one geared towards voters. We were also given a small insight into what we might expect by way of tax policy in the Conservative manifesto to be published later in the year.
That said, there were certainly some interesting announcements in relation to UK real estate taxes, a summary of which is provided below. We might also see further announcements relevant to the real estate sector on 18 April with the Tax Administration and Maintenance Day.
SDLT: Multiple Dwellings Relief
From 1 June 2024, Multiple Dwellings Relief will be abolished. Although this will be a welcome simplification to the rules surrounding purchases of multiple residential properties, for certain acquisitions (notably purchases of large Build-to-Rent properties) this could result in an increased SDLT charge.
Property transactions with contracts that were exchanged on or before 6 March 2024 will continue to benefit from the relief regardless of when they complete, as will any other purchases that are completed before 1 June 2024.
Reserved Investor Fund (Contractual Scheme)
Last Spring, the government announced a consultation on creating the Reserved Investor Fund (Contractual Scheme) (RIF) – a new unauthorised UK funds vehicle to promote investment into UK real estate. The consultation responses have now been released and the government has confirmed that it will begin legislating for the RIF in Spring Finance Bill 2024.
The RIF is intended to fill a gap in the market – introducing a new onshore lower-cost (and unauthorised) alternative to existing fund structures.
Capital Gains Tax: Residential Property
From 6 April 2024, the higher rate of Capital Gains Tax for residential property disposals will be cut from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.
Capital Allowances
In the last Autumn Statement, the Chancellor made “full expensing” permanent – allowing companies to write off the full cost of qualifying plant and machinery expenditure on certain assets (which can include certain specific expenditure on fittings within buildings) in the year of investment. The government has now announced that it intends to extend the full expensing regime to cover leased assets when fiscal conditions allow, and draft legislation will be published shortly.
Furnished Holiday Lettings
The special tax rules for rental income from properties that qualify as furnished holiday lettings will be abolished from 6 April 2025. This will eliminate the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants.
Miscellaneous
As of 6 April 2024, the main rate of employees’ National Insurance Contributions (NICs) will be reduced from 10% to 8% and for the self-employed, Class 4 NICs will be reduced to 6%.
From 6 April 2025, the current tax regime for non-UK domiciled individuals will be abolished and replaced with a new residence-based regime. This new regime will mean that individuals will not pay UK tax on any foreign income and gains arising in their first four years of UK tax residence, provided they have been non-tax resident for the last ten years. The government has also announced an intention to move to a residence-based regime for Inheritance Tax, and will consult on the best way to achieve this (although it has confirmed that no changes to Inheritance Tax will take effect before 6 April 2025).
Finally, from 1 April 2024, the VAT registration threshold will be increased to GBP90,000.
Should you have any queries on the Spring Budget, please reach out to your usual UK tax contact or one of the authors.
Mark Burgess, Partner
Matt Davies, Partner
Richard Harbot, Partner
Gemma Grunewald, Senior Associate
Katie Raine, Associate
Richard Woolich, Partner
