Key Changes for Mortgages, Property Investment, and Taxation in the UK
The UK’s latest budget has landed, leaving its mark on property investment, mortgages, and tax landscapes. Now that the dust has settled and the finer print has come to light, it’s time to navigate what’s new for anyone with a stake in property—whether you’re buying your first home, managing a holiday let, or holding a buy-to-let portfolio. This blog explores the changes to Stamp Duty Land Tax (SDLT), holiday let taxation, and Capital Gains Tax (CGT) and what they mean for prospective and seasoned investors alike.
Stamp Duty Land Tax (SDLT) Changes: A Temporary Reprieve and Future Adjustments
For Now Until March 2025: As of today, England and Northern Ireland maintain a favourable SDLT setup until 31 March 2025. Under this, standard property purchases by non-First Time Buyers enjoy a nil rate threshold at £250,000. First Time Buyers receive a more generous break, with SDLT-free purchases up to £425,000, and a qualifying property price cap of £625,000.
From 1 April 2025: A Reduced Threshold But take note—come April 2025, the winds of change will hit, reducing these thresholds. The SDLT-free allowance will fall back to £125,000 for standard purchases, while First Time Buyers will see a reduction to £300,000, with a new cap at £500,000 on qualifying properties. For those looking to step onto the property ladder or add to their portfolio, planning the timing of purchases is key.
A Hike for Second Properties From 31 October 2024, the SDLT “additional rate” for second homes and buy-to-let properties will climb from 3% to 5% above standard residential rates. This rise might nudge would-be investors to weigh up the timing of any second property purchases and how this may affect long-term returns.
Furnished Holiday Lettings (FHL): A Tax Shake-Up from 2025
Holiday Let Tax Regime Ends Landlords with furnished holiday lettings have long benefited from tax treatment that sets FHL properties apart. However, from 6 April 2025 (for Income and Capital Gains Tax) and 1 April 2025 (for Corporation Tax on chargeable gains), these properties will lose their distinctive tax advantages. Going forward, they will be taxed in line with non-furnished property businesses, impacting income, gains, and reporting.
The Key Tax Impacts of the FHL Change
- Finance Costs: Loan interest for FHLs will be limited to the basic rate, reducing net income for higher-rate taxpayers.
- Capital Allowances: The removal of capital allowances on new expenditure, replaced by relief only on domestic item replacements, will further narrow profit margins.
- Capital Gains Reliefs Gone: FHL owners will lose access to CGT reliefs for trading business assets, which may deter sales or restructuring of FHL portfolios.
- Impact on Pension Calculations: Earnings from an FHL will no longer count as relevant UK earnings for pension relief calculations, potentially limiting pension contributions for some investors.
With FHLs joining the same tax structure as other property businesses, these changes could dramatically impact profitability, and current FHL owners may wish to review their strategies before 2025.
Capital Gains Tax (CGT): Rates Rise and Exemptions Shrink
Annual Exemption Remains Low The annual CGT exemption was cut to £3,000 for individuals in 2024/25, and it will remain there for 2025/26. For those regularly disposing of assets, this reduced allowance means potentially higher CGT bills and highlights the importance of timing asset disposals carefully.
Rising Rates for Business Asset Disposals Under the latest changes, CGT rates for gains on business asset disposals increase from 10% to 14% for disposals after 6 April 2025 and to 18% from 6 April 2026. For property owners with buy-to-let portfolios or other business assets, this rate hike could significantly affect post-sale returns.
General Rate Increases From 30 October 2024, CGT rates will rise from 10% to 18% for gains within the non, starting, and basic rate bands and from 20% to 24% for gains in the higher and additional rate bands. Importantly, residential properties not qualifying for principal private residence relief (e.g., buy-to-let properties) retain rates of 18% (basic rate) and 24% (higher rate), making timing an essential consideration for disposals.
How These Changes Affect Buyers and Property Investors
First-Time Buyers and Homeowners The SDLT threshold reductions post-2025 will impact affordability, particularly for those on the cusp of qualifying for relief now. For First Time Buyers, making a move before April 2025 may mean saving a substantial amount in SDLT.
Buy-to-Let and Holiday Let Investors For those in the buy-to-let or holiday let market, the changes to SDLT on additional properties, combined with the increase in CGT rates and the overhaul of the FHL tax regime, mean this sector is set for a shake-up. Investors may wish to assess the long-term viability of holding or selling assets, considering the rising costs of additional SDLT and CGT.
Planning Ahead: Seeking Financial Guidance Whether you’re on the verge of buying, selling, or simply managing existing property investments, these updates underscore the importance of thoughtful financial planning. Changes to SDLT, CGT, and the FHL tax regime will likely alter property yields and profit calculations, making professional advice more valuable than ever.
Conclusion: True Advice for a Changing Landscape
In times of change, it is important to be able to make an informed choice. The latest budget changes bring both challenges and opportunities whether you’re an investor sizing up property options, a landlord looking to maximise returns, or a First Time Buyer taking your first step. If you need clear and honest help with these matters, True Advice Financial Services offers expertise in tailored financial planning and tax advice to help you make the most of your investments.
For detailed guidelines on SDLT thresholds and additional rates, consult the UK government’s SDLT information page. Remember, early preparation and proactive planning are the keys to thriving amid these changes—get in touch with us for advice and a clearer financial path forward.
Disclaimer
This guide is for informational purposes only and does not provide tax or legal advice. The tax implications for individuals can vary based on personal circumstances and may change over time. For specific advice, it is recommended to consult a qualified professional.
Please note that the Financial Conduct Authority does not regulate advice on taxation, estate planning, inheritance tax planning, wills, or trusts. Trusts are a particularly complex area of financial planning and require expert guidance.
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He holds a CeMAP qualification and has been advising since 2018, continually updating his expertise through ongoing training. Ashley's client-focused approach ensures personalized, effective advice, fostering long-term relationships. Outside of work, he enjoys playing football and exploring new countries. For personalized financial advice, Ashley is dedicated to helping clients achieve their goals.
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