Property Tax Updates and Strategic Insights for Investors & Developers: Autumn Budget 2024

14 November 2024

Property Investors & Developers

For property investors and developers, the Chancellor’s announcements on property likely came as a bit of a rollercoaster of emotions.

Whilst in many areas, particularly capital gains tax (CGT), it could have been a lot worse, the SDLT increase came as a bit of an unexpected curveball.

So, what were the property headlines in the Autumn 2024 budget?

Stamp Duty Land Tax (SDLT) Increase

The surcharge on second homes and buy-to-let properties has risen from 3% to 5%, effective immediately.

This change aims to curb speculative buying and improve opportunities for first-time buyers in a competitive market but is not welcome news to those looking to expand their property portfolio or increase profitability of flip projects.

Capital Gains Tax (CGT) Unchanged for Residential Property

Despite speculation, the CGT rates for residential property sales remain the same (18% and 24%).

However, CGT for non-property assets, such as shares, has increased from 10% to 18% for the lower rate and from 20% to 24% for the higher rate.

This came as a great relief following much speculation on rises in CGT for landlords!

Commitment to Housing Development

The government has pledged £3.1 billion to support the construction of 1.5 million new homes over five years.

Additionally, £3 billion will be allocated to aid smaller developers, aiming to boost housing supply and address affordability issues.

This, combined with other commitments from Labour to reduce red tape in development and streamline planning permission applications will be welcome announcements to property developers.

FHL changes still going ahead

There were no talks of going back on previous announcements to remove the beneficial tax treatments for Furnished Holiday Lets, meaning as anticipated from 6 April 2025, FHLs will be considered the same regular investment properties and all beneficial CGT and Income tax treatments will be lost

What can investors and developers do in light of these changes?

A proactive approach can help investors and developers navigate the property tax challenges presented by the Autumn 2024 budget

Here are some strategies to consider:

Plan for Long-Term Affordability and Value

Reassess Buy-to-Let Investments

With the SDLT surcharge now at 5%, investors may need to carefully evaluate the return on investment (ROI) for new buy-to-let properties.

Focusing on long-term capital appreciation rather than short-term gains could be a more viable strategy

Engage in Social Housing Projects

We’re seeing a surge in demand for properties to be used as social housing.

Partnering with local councils or local firms on social housing you could enable investors a guaranteed rental return or provide developers with a stable returns and possibly more favorable regulatory terms.

Leverage Government Support for Development

Utilise New Development Funding

The £3 billion support package for smaller developers presents opportunities for those willing to undertake projects that align with government priorities, such as affordable and sustainable housing.

Focus on Energy Efficiency

A lot of local councils offer funding grants focused on improving energy efficiency within properties in a bid to make the housing market greener.

For investors and developers, it’s worth exploring what type of funding may be available from your local council for things like new insulation, new boilers etc.

Portfolio Structuring

Seeking expert tax advice is key for both investor and developers.

We can advise on ensuring your set up is as tax efficient as possible, from group reorganisations, property incorporations or leveraging inheritance tax planning.

Investors may want to consider transferring assets into other vehicles, such as a family trust as a part of longer term IHT planning, or for those with a larger portfolio in their personal name, incorporation, may be a consideration.

Check any SDLT Reliefs

With the increase in the surcharge on second properties, any SDLT reliefs that may be available are now even more valuable.

Here’s some things to look out for:

Derelict properties

A property may be classified as non-residential if it is genuinely uninhabitable.

This could include buildings that are in such a state of disrepair that they cannot be used as a home without substantial renovation or rebuilding, perhaps the structure is unsafe, with significant damage to the roof, walls, or foundation or Utilities such as water, electricity, or sewage are not functional or connected.

In this case, SDLT would not be chargeable on the purchase.

Mixed use properties

If the property includes a mix of residential and commercial elements, the entire transaction may qualify for mixed-use rates, which are the same as non-residential rates.

These rates are much lower and aren’t subject to the 5% surcharge.

Different Rules

There are different rules for certain types of property or land transaction which may reduce the overall SDLT payable, such as in land exchanges, option contracts or sub-sales.

For example sub sales relief is available when a developer acquires land but simultaneously arranges to sell it to another party.

The original acquisition is treated as exempt or partially exempt from SDLT if specific criteria are met.

Getting in touch

For more information on planning your property portfolio or developments, or to discuss the impact of the Autumn 2024 Budget on property tax, please contact Christie or Darren at 01634 731390.