The Chancellor Jeremy Hunt delivered what is expected to be his final Budget before a General Election in early March, with some surprise measures for landlords.

In this article, we’ve set out the key policy updates that impact landlords in the private rented sector, as well as those who operate in the short-term holiday lets market.

Reduction in Capital Gains Tax (CGT) on property disposal

In a surprise move, the Chancellor announced a reduction in CGT for higher-rate taxpayers who sell residential property, including buy-to-let, holiday lets or second homes but not their main residence, from 28% to 24%. CGT for basic-rate taxpayers remains at 18%.

The reduction generally applies where exchange of contracts occurs on or after 6 April, but its impact will be negated by the lowering of the tax-free allowance for CGT from £6,000 to £3,000, which comes in on the same date.

Commenting on the measure, Paragon Bank Managing Director of Mortgages Richard Rowntree said: “This move is intended to stimulate transactions while not negatively impacting net tax revenue. The move will hopefully increase fluidity within the property market, spanning both the owner-occupier and private rented sectors, and mean more people will be incentivised to buy and sell properties in a way that best meets their needs and those of society more broadly.” 

Tax regime abolished for furnished short-term holiday lets

The lowering of CGT could have been a sweetener for owners of furnished short-term holiday lets who may wish to sell after they were hit with a change to the tax treatment of their rental income.

From April 2025, short-term holiday lets operators who own property in their personal name will no longer be able to receive full tax relief on their mortgage interest payments. Other tax benefits, such as capital gains tax reliefs, will also be scrapped.

The move brings the tax treatment of holiday lets in line with buy-to-let landlords in the private rented sector, with the Chancellor seeking to boost rental supply to local populations in popular holiday destinations and in major cities.

However, full draft legislation has yet to be published on how the Government expects to implement the changes.

Richard Rowntree said: “The short-term holiday lets market has grown rapidly in the past decade, with the preferential tax treatment of these properties a major draw for operators in the sector. This is a significant change and, as we saw in the buy-to-let market when mortgage interest relief was phased out from 2017, may see a reduction in investor appetite for this segment of the market.

“We could also see some property switch back into the long-term rental market, particularly in urban areas.”

Scrapping of Multiple Dwellings Relief (MDR)

The MDR, which allowed tax savings on Stamp Duty Land Tax (SDLT) for bulk property purchases, will be scrapped on 1 June 2024. This means buyers will pay SDLT based on the total purchase price of all linked property transactions, rather than the average price per dwelling under the existing regime.

For example, if you purchased two properties in the same transaction or linked transactions, priced at £700,000 and £500,000, you would pay SDLT per property based on the average price of the overall transaction, £600,000. In this example, the Stamp Duty bill would be £71,000 in total, including the 3% surcharge for additional properties (2x £35,500).

The removal of MDR means you will pay SDLT on the total figure of £1.2 million, resulting in a tax payment of £97,250, including the 3% surcharge.

The Government argues that the relief was scrapped because it was mainly used for private use, rather than to boost supply into the rental sector. 

Richard Rowntree says: “The Government insists that abolishing MDR is designed to tackle abuse by purchasers acquiring property for personal use and we don’t see much evidence of its use with our landlord customers.”

Visit the HM Treasury website for the full Spring Budget 2024.