Property Newsletter – May 2024

Welcome to our monthly newsletter for property landlords. We hope you find this informative and please contact us to discuss any matters further.

Furnished Holiday Lettings: Reaction

In Budget 2024, which took place on 6 April, the Chancellor announced that the concept of Furnished Holiday Lettings (FHLs) will be abolished from 6 April 2025. This means that the tax reliefs available to those operating FHLs will no longer be available.

Now that the dust has settled, let’s consider some of the wider implications of the announcement.

We still do not know any of the details relating to the announcement. Some expected draft legislation to be published on ‘Tax Administration and Maintenance Day’ (18 April) but nothing was forthcoming. Some commentators have surmised that the measure was ‘last minute’ and that it will be a while before detailed legislation can be published.

Further detail cannot come soon enough, however. In order for accountants and agents to effectively advise their clients, they need to know about the Treasury’s plans in good time. The one thing that is certain is that 6 April saw the start of a period of concern and uncertainty for those with FHLs.

The measure was announced as a means of making more affordable homes available. The increase in FHLs has resulted in fewer homes available for residents, particularly in tourist hotspots. According to BBC research, the number of holiday lets rose by 40% between 2018 and 2021, with tourist areas seeing the sharpest increases.

Housing and poverty campaigners, however, have said that the measure is “too little, too late”.

The measure should not be considered in isolation; in the Budget the Chancellor also announced the abolition of stamp duty Multiple Dwellings relief (from 1 June 2024) and a 4% cut in the main rate of capital gains tax (CGT) on residential property to 24% from 6 April 2024. These measures not only incentivise disposing of FHLs, but dissuade landlords from buying more. In addition, non-tax measures such as the proposed licensing and registration schemes for holiday lets, to be introduced from the Summer of 2024, will mean owning a holiday let will entail even more compliance costs.

Those in the Tourism sector are concerned that the decrease in supply of holiday lets will have a knock-on impact for businesses and workers who rely on tourism.

Meanwhile, property experts are not sure if the measures will substantially increase the number of long-term lets. Whilst the rate of CGT has been cut, the Annual Exemption has decreased to just £3,000 for 2024/25. Property experts predict that selling prices for FHLs will decline, given that new owners will no longer be able to claim tax advantages. This could result in FHL owners keeping their properties and simply not bothering to rent them out.

We will keep you informed of any developments in this area.

Scotland: Private sector rents increase in the past year.

The Scottish Government has published its review into the housing market, which shows that private sector rents increased over the year to September 2023, with increases ranging from 1.5% in Dumfries and Galloway up to 22.3% in Greater Glasgow. Increases in 11 of the areas reviewed were above the average 12-month UK CPI inflation rate for the corresponding period of 9.0%.

The statistics are based predominantly on advertised rents, so they do not reflect the Cost of Living (Tenants Protection) (Scotland) Act 2022 rent cap restrictions from September 2022 to March 2024, which applied to existing tenants. The report states “Given the rate of growth in new let rents, it is likely that it in the absence of a rent cap some existing tenants would also have experienced large increases in rents, depending on the rent-setting approach of individual landlords.”

The review can be viewed here.

Wales: Public consultation on Land Transaction Tax reliefs

Published on 8 April 2024, the Consultation on Land Transaction Tax Reliefs seeks the views to several Land Transaction Tax (LTT) proposals. Seemingly in response to the Budget 2024 measure to abolish Multiple Dwellings Relief for Stamp Duty Land Tax (SDLT) applicable in England, the consultation proposes the abolition of Multiple-dwellings relief for LTT in Wales.

In addition, the consultation seeks views on the proposed abolition of the relief provided on the purchase of 6 or more dwellings in a single transaction, and the extension of an existing LTT relief to Welsh local authorities when purchasing property for social housing purposes.

The consultation closes on 19 May 2024 and can be viewed here.

UK Private rents and house prices: April 2024

The recent report published by the Office for National Statistics measures house price inflation and private rent inflation for new and existing tenancies.

The report notes that average UK house prices decreased by 0.2% in the 12 months to February 2024, up from a decrease of 1.3% in the 12 months to January 2024.

Average UK private rents increased by 9.2% in the 12 months to March 2024, up from 9.0% in the 12 months to February 2024.

In the 12 months to March 2024, average monthly rents increased to £1,285 (9.1%) in England, £727 (9.0%) in Wales and £947 (10.5%) in Scotland.

In the 12 months to January 2024, average rents increased by 10.1% in Northern Ireland.

The report can be viewed here.