Navigating Changes in Property Taxation: An Overview of Recent Updates

Navigating Changes in Property Taxation: An Overview of Recent Updates

In the dynamic landscape of property taxation, staying informed about legislative changes is paramount for property owners and investors alike. Here, we delve into the latest updates impacting property taxation in the UK.

 

Capital Gains Tax (CGT) Adjustments

The realm of Capital Gains Tax (CGT) is witnessing adjustments, particularly concerning residential property sales. Effective from April 6, 2024, the higher rate of CGT applicable to residential property gains will be reduced from 28% to 24%. Conversely, the lower rate, set at 18%, remains unchanged for gains within an individual’s basic rate band. Moreover, rates for CGT associated with gains from carried interest will remain steady from the same date, maintaining alignment with CGT rates on disposals of residential properties.

Scope Limitations on Agricultural and Woodlands Relief

Restrictions are set to tighten on the scope of Agricultural Property Relief and Woodlands Relief. Starting April 6, 2024, these reliefs will be confined to properties within the UK. Any property situated in the European Economic Area (EEA), the Channel Islands, and the Isle of Man will be treated akin to properties located outside the UK.

 

Changes in Stamp Duty Land Tax (SDLT) – Multiple Dwellings Relief (MDR)

Effective June 1, 2024, the Multiple Dwellings Relief (MDR) will be phased out. Transitional rules, however, allow for MDR claims on contracts exchanged on or before March 6, 2024, with various exclusions in place.

 

Shifts in Non-UK Domiciled Tax Rules

From April 6, 2025, the UK government will transition from the remittance basis of taxation for non-UK domiciled individuals to a simplified residence-based regime. Those opting into this regime will enjoy tax exemption on foreign income and gains during the initial four years of tax residence.

 

Abolition of Furnished Holiday Lets (FHL) Tax Regime

In a notable development, the tax advantages associated with letting properties as short-term holiday lets will be phased out starting April 2025. Anticipated draft legislation, featuring an anti-forestalling rule, is expected to counteract attempts to exploit tax benefits under the current FHL rules.

As these changes unfold, property owners and investors are encouraged to stay abreast of evolving taxation policies to navigate their financial strategies effectively.