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I’m a property owner – how will the changes to CGT and furnished holiday lettings tax affect me?.

The Spring Budget brought many changes made by the Chancellor, including changes which would impact property owners.

The two main changes impacted:

  • Capital Gains Tax (CGT) on most property disposals
  • Furnished holiday lettings

It is important you understand these changes, when they come into effect and how you will be impacted so you can ensure you remain compliant with your tax obligations.

How is my CGT obligation changing?

As long as the property is not your main residence, any residential property you sell for a gain is liable for CGT.

Usually, residential property gains would be taxed at 18 per cent for gains that fall within the basic rate band and then 28 per cent thereafter.

However, from 6 April this year, the higher rate will be reduced to 24 per cent – this affects property sales that are exchanged on or after this date.

You need to submit property returns but you also need to be aware that any forms submitted from 6 April may still be required to use the 28 per cent rate if the sale was exchanged on or before 5 April.

This is due to the 60-day reporting requirement and is important to know so you are up to date with your tax obligations.

To remain compliant with your CGT obligation, you should:

  • Report gains online
  • Pay the tax within 60 days if the completion date was on or after 27 October 2021; or
  • Pay the tax within 30 days if the completion date was between 6 April 2020 and 26 October 2021

When you complete the tax return, you need to show the disposal proceeds before any deductions.

After this, you can claim the cost of buying the assets and broker fees as allowable costs.

If you are a landlord, you will be able to benefit from the lower rate of CGT on property disposals if you choose to sell your property after 6 April.

This is due to the abolishment of the Furnished Holiday Lets preferential tax regime from April 2025 which is discussed below.

Will my furnished holiday letting be affected?

From 6 April 2025, the Furnished Holiday Lets preferential tax regime will be abolished.

As a result, your furnished holiday letting will be treated as a property investment business from 6 April 2025.

However, the decision to abolish this regime means the following tax benefits of being treated as a trade will be lost from 6 April 2025:

  • Interest for businesses operated by an individual will cease to be a deduction and relief will instead be given as a 20 per cent tax credit from the individual’s tax liability. If you are a higher rate taxpayer, you will receive a reduction in tax relief for interest to the 20 per cent rate
  • Expenditure on qualifying assets will not be eligible for capital allowances from 6 April 2025 although you might be able to instead claim a deduction from profits for the cost of replacing domestic items
  • If you rely on profits of your furnished holiday lettings business to support obtaining tax relief for their pension contributions, you will need to seek our expert advice as your profits will no longer be treated as relevant earnings from 6 April 2025

To help combat these changes, you will need to evaluate your business operations and ensure you are compliant with your tax obligations as a property owner.

If you would like to know more about the changes and how you will be affected, please get in touch with a member of our team today.

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