Chancellor Jeremy Hunt announced several changes relating to property and housing in the Budget yesterday, which will affect home-owners and first-time buyers in the upcoming year.
Hunt had promised that “building homes for young people” was a priority in his speech, but some were left disappointed due to the lack of acknowledgement and changes announced to help this demographic.
Martin Lewis addressed some of the announcements on Twitter, including the fact there will be no change to the Lifetime ISA penalty for first-time buyers buying a home over £450,000.
Lifetime ISAs can be used to save for your first home. You can put in up to £4,000 a year, and for everything you put in, the government will add a 25% bonus, up to a maximum of £1,000 a year.
But, clauses are in place, including the fact the home you buy with the savings must cost £450,000 or less.
The Money Saving Expert took to Twitter to explain the situation. He said:
“No changes to Lifetime ISAs penalty for 1st time buyers buying homes over £450,000 I’m afraid. As I’ve been campaigning on it, the Chancellor told me just before the budget he said the reason he’s not doing it was ‘I wanted to do a big home ownership package but that doesn’t work until property prices are definitely rising and I still have to keep an eye on overall borrowing.’“
“He also told me ‘I want to do more than remove the penalty. I want to reform LISAs.’ I am of course disappointed there are no changes this time, but at least it is not off the table.”
Issues have been raised as first-time buyers, especially those living in London who have been saving for a home, say that £450,000 is not enough as house prices rise, and this penalty should be removed.
We have broken down a list of the property announcements made in the Spring Budget:
Capital gains tax rate cut
The chancellor announced that from April 6, the higher rate of capital gains tax (CGT) on residential property sales will be cut from 28% to 24%.
This tax is paid on profits made when selling a buy-to-let or second home. However, your primary residence is not subject to tax.
At present, basic-rate taxpayers pay 18% on their gains, while higher and additional-rate taxpayers pay 28%.
Everyone has an annual CGT-free allowance of £6,000 (£3,000 from April 2024) and can offset costs incurred in selling the property, such as estate agent fees.
The government says this change will ‘encourage landlords and second home-owners to sell properties, making more available for buyers’.
Stamp Duty Land Tax
There was much speculation about what would be announced regarding Stamp Duty Land Tax in the Spring Budget, including rumours about stamp duty relief.
However, people have been left disappointed due to the lack of changes for first-time buyers and downsizers.
The government said it will move to abolish multiple-dwellings relief from June 2024. This relief applies when someone buys more than one property in the same transaction, for example, several flats in a block.
At present, buyers can pay stamp duty based on the average price of the individual properties they purchase, rather than the total cost of the transaction – thereby reducing their tax bill.
For example, if you buy five flats in one transaction for £1m, your stamp duty bill would currently be based on five £200,000 transactions. But from June, it will be based on the total cost of £1m – resulting in a much higher bill.
Non-dom tax status abolished
Non-domiciled (non-dom) people live in the UK but have their home overseas for tax purposes and do not pay UK tax on money they make elsewhere.
But in the spring Budget, Hunt said that, from 2025, new arrivals to the UK would not pay any tax on foreign income and gains for their first four years of UK residency, but after that, those who continued to live in the UK would pay the same tax as other UK residents.
Regeneration schemes
The government announced regeneration housing schemes to unlock new homes. Some of these plans include the government’s plan for transforming Leeds and unlocking 20,000 new homes.
This is part of the government’s vision to deliver one million homes within this Parliament, helping more people across the country to own their own.
Meanwhile, the government announced an investment of £20 million in a social finance fund to support the development of community-led housing schemes over ten years, subject to a business case.
Short-term rental crackdown
The government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants.
This will take effect from 6 April 2025 and draft legislation will be published in due course.
In his speech, Hunt said the Furnished Holiday Lettings tax regime “is creating a distortion meaning that there are not enough properties available for long-term rental by local people”
“To make the tax system work better for local communities, I am going to abolish the Furnished Holiday Lettings regime.”
No change to the Lifetime ISA cap
Lifetime ISAs can be used to save for your first home. You can put in up to £4,000 a year, and for everything you put in, the government will add a 25% bonus, up to a maximum of £1,000 a year.
But, clauses are in place, including the fact the home you buy with the savings must cost £450,000 or less. Issues have been raised as first-time buyers, especially those living in London who have been saving for a home, say that £450,000 is not enough as house prices rise, and this penalty should be removed.
First-time buyers have been left disappointed after Hunt failed to address the cap in the Spring Budget.
No 99 per cent mortgage
There had been rumours that the Chancellor was considering a government-backed 99 per cent mortgage scheme. This would be aimed at first-time buyers who would be allowed to put down a deposit of just one per cent when buying a property.
However, this was not addressed in the Spring Budget.
Further reading
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