Jeremy Hunt announces decisive measures in the recent budget, focusing on reshaping property ownership rules to increase the availability of homes for local residents and first-time buyers.
The comprehensive plan involves eliminating tax perks for holiday let businesses and introducing a capital gains tax cut for long-term landlords.
End of Tax Benefits for Holiday Let Businesses
The Chancellor’s commitment to abolishing the furnished holiday lettings (FHL) tax regime from April 2025 marks a significant shift in the property landscape.
With approximately 127,000 properties registered under the FHL regime, the objective is to level the playing field between holiday home firms and buy-to-let landlords, creating more opportunities in the private rental sector.
Capital Gains Tax Cut for Long-Term Landlords
Simultaneously, a surprise tax cut is introduced for buy-to-let landlords engaging in long-term rentals.
The higher rate of capital gains tax on second home sales will see a reduction from 28% to 24% starting April 6, 2024.
The rationale behind this move is to encourage landlords to sell their properties, contributing to the availability of homes for first-time buyers.
Contradictions and Criticisms: Balancing Holiday Let Tax Measures and CGT Cuts
Some experts highlight a potential contradiction in the government’s approach. While measures targeting holiday let businesses aim to increase long-term rental homes, the capital gains tax cuts may incentivize landlords to sell their properties.
The balance between these strategies remains a subject of scrutiny, raising questions about their collective impact on the housing market.
Holiday Let Owners Facing Tax Changes
Holiday let owners, accustomed to deducting interest payments and capital allowances, face significant tax changes.
As of April 6, 2025, these benefits will cease to exist, making holiday lets less attractive from a tax perspective.
Experts anticipate a potential shift of holiday homes into the private rental sector, aligning with the Chancellor’s intentions.
Capital Gains Tax Reduction: Implications for Rental Sector
The Chancellor’s assertion that the capital gains tax reduction will prompt more landlords to sell their properties raises debates about its actual impact.
While it aims to benefit first-time buyers, concerns arise about a potential reduction in the availability of rental properties, leading to increased rents and challenges for tenants.
Criticism and Concerns: The Human Aspect of Tax Changes
Critics, including campaign groups and industry professionals, express concerns about the consequences of incentivizing landlords to sell.
Fears of a sudden exodus leading to homelessness for renters are raised, emphasizing the need for a balanced approach that considers both property owners and those residing in the affected homes.
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