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30 October 2024

Autumn Budget: Property Taxes and SDLT

The recent budget announcement has confirmed the abolition of the Furnished Holiday Lettings (FHL) tax regime.

Furnished Holiday Lettings (FHL)

It is no surprise that the budget has confirmed the abolition of the FHL tax rules with effect from 16 April 2025, The Furnished Holiday Lettings (FHL) rules provide short term let properties a preferential tax status over and above those of ordinary residential property letting activities.

The removal of the separate treatment means all Furnished Holiday Lettings (FHL) businesses operated by Corporates, Individuals or Trusts will now be within the scope of tax under the standard property income and capital gains tax rules.

This will have significant impacts on Furnished Holiday Lettings (FHL) businesses, specifically the impact of now having restricted tax relief on residential finance costs (except for finance costs in the scope of corporate tax), and no longer having access to more beneficial entitlement to Capital Allowances, Capital Gains Tax reliefs and that earnings will no longer be qualifying for pension tax relief purposes.

Any Furnished Holiday Lettings (FHL) business which relied heavily on finance to operate, or pension contributions for tax mitigation and pension planning will no doubt suffer as a result of these changes. There will also be significantly higher taxes on succession planning and asset disposals made by those businesses. 

Stamp Duty Land Tax

The Higher Rates for Additional Dwellings of Stamp Duty Land Tax, which applies to purchases of second homes and corporate purchases of residential property are increasing from 3% to 5% from 31 October 2024.

The single rate of Stamp Duty Land Tax that is charged on the purchase of dwellings costing more than £500,000, will also be increased by 2% from 15% to 17%

Those who exchanged contracts prior to 31 October 2024 are not affected by this rate increase, however transitional rules do apply where there are variations, sub-sales or where an option is subsequently exercised.

There were no changes to Non-UK Resident Stamp Duty Land Tax which remains at 2%.

If you have any questions on any of the subjects raised in this update, please contact our budget team to find out more.

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