Spring Budget 2024: impact on the real estate sector

The Budget contained a number of measures that will affect investors, developers and operators in UK real estate, particularly for residential property. While some of the big-ticket items for personal tax had been trailed in the media beforehand, such as the cut to national insurance, the changes affecting property taxes were less expected.

Real Estate
Alex Wilson and Louisa Lamburn
Published: 07 Mar 2024 Updated: 07 Mar 2024
Budget Real estate Business tax Tax

Jeremy Hunt stated his intention to put the country back on the path to lower taxes, announcing plans to reduce capital gains tax for residential property.

The higher rate of capital gains tax, which currently applies to disposals of residential property (when gains fall outside an individual’s basic rate band, in the absence of private residence relief) will be reduced from 28% to 24% from 6 April 2024. This applies to disposals made by individuals, trustees and personal representatives. There will be no equivalent reduction for gains falling within the basic rate band, which will continue to be taxed at 18%. The 18% and 28% rates that apply to gains in respect of carried interest will also remain unchanged.

In contrast to this tax break for investors in residential property, the Government also announced amendments to stamp duty land tax (SDLT), including the abolition of multiple dwellings relief, where relief is currently obtained for the acquisition of an interest in more than one dwelling in a single transaction. This relief has often been used by large property investors in the private-rented and student accommodation sectors, in line with its original policy objective. The relief, however, has also been utilised, often contentiously, in the higher-value residential property market and it is this practice that motivated the Government’s move to abolish the relief. The Government has decided not to change the approach to the taxation of mixed-use property, and an apportionment methodology will not be introduced.

There were other changes to SDLT, too. Amendments to SDLT relief for registered providers (RP) will be introduced to remove uncertainty around the availability of the relief for RPs purchasing property using public subsidy, and public bodies will be removed from the scope of the 15% rate of SDLT for acquisitions of high-value residential property acquired by non-natural persons. These are welcome clarifications to existing legislation.

Following the Government’s review of the UK’s funds regime, a consultation was launched in April 2023 into a new unauthorised contractual scheme, the reserved investor fund (RIF). The RIF is intended to act as a more flexible, onshore, lower-cost alternative to existing UK fund structures targeted at professional and institutional investors and allowing investors to be in the same position as if they held the underlying assets directly. A summary of responses to the consultation has now been published. This summary confirms that, although there will be three types of ‘restricted’ RIF (being UK property rich RIF, exempt investor RIF and a non-UK property RIF), an ‘unrestricted’ RIF, in terms of investment strategy and investor base, will not be introduced given the legislative complexities this would require. The response also confirms that the capital gains tax position will mirror that for existing co-ownership authorised contractual schemes (CoACS), with units in the RIF being treated as investors’ capital gains tax ‘asset’ and the underlying property of the RIF being disregarded. It was announced that relevant legislation will be introduced in the Spring Finance Bill 2024, with further detailed rules to be set out in a statutory instrument at a later date.

More widely, it was confirmed that the main rate of corporation tax will be maintained at 25%, and the small profits rate at 19%, from 1 April 2025 onwards. On capital allowances, the Government has announced its intention to extend the 100% full expensing regime to leased assets. Although the measure will only be legislated when it is considered to be economically viable, this will be good news for many plant hire and construction businesses that have previously been excluded from the super-deduction and full expenses regimes.

Other property-related announcements included the abolishment of the furnished holiday lettings (FHL) regime, which will affect landlords of short-term residential lets from April 2025. At the other end of the scale, the extension of tax reliefs relating to freeport zones for an additional 5 years will be welcomed by the affected areas. The Government will also be cracking down on the avoidance of business rates, and has announced a consultation on a general anti-avoidance rule to combat this.

As ever, while there were a number of page-grabbing headlines in the Chancellor’s Spring Budget, the devil will be in the detail, and we keenly await further publications to bring clarity to a number of the announcements.

Detailed analysis

Business rates

The Spring Budget contained no broad measures to provide relief for those facing business rate increases in April 2024. A targeted relief was announced to further boost the creative sector, with eligible film studios in England set to receive 40% business rates relief.

The biggest announcement is the extension to the empty property rates reset period of 6 weeks to 3 months from 1 April 2024. The Government will also be consulting on adopting a general anti-avoidance rule for business rates in England.


There was a dissatisfactory silence on business rates increases in the Spring Budget, with no response to the call to reduce the rise in rates that are set to rise in line with September 2023’s CPI rate of 6.7%. This will deliver a non-domestic standard rate multiplier of 56.4p on 1 April 2024. This rise will affect businesses with a ratable value over £51,000.

The commitment to encourage the creative industries was a positive measure, with eligible film studios being granted 40% relief on their business rate assessments until 2034.

In the previous Spring Budget, a consultation was announced to explore measures to combat avoidance of business rates. The responses to this consultation were published on the day of the 2024 Budget. The resulting policy outcome was a measure designed to discourage ‘box shifting’, where properties are repeatedly occupied for short periods in order to optimise empty property relief. The empty property relief ‘reset period’ will be extended from six weeks to thirteen weeks, effective from 1 April 2024.

Our comment

The inaction by the Chancellor to address the business rates burden will be unwelcome news for many businesses who will collectively shoulder the burden of the increase exceeding £1.5 billion. The lack of action will inevitability impact business decisions around growth and investment. The extension of the empty rates reset period will be devastating for those with vacant space in their commercial real estate portfolios.

SDLT multiple dwellings relief abolished

The Government has announced it will abolish SDLT multiple dwellings relief (MDR) from June 2024. This policy is intended to prevent perceived abuse of MDR but will also have a knock-on impact on large scale property rental businesses, in particular investors in student accommodation.


MDR is available on purchases of two or more residential properties in a single transaction. On application of MDR, the SDLT liability is calculated by reference to the average purchase price per dwelling, multiplied by the number of dwellings (subject to a cap of 1% of the total chargeable consideration). The effect of the relief is to allow greater access to the lower rate bands of SDLT to reduce the overall SDLT liability. The relief was originally introduced to support investment in the private rental sector.

Following a consultation in early 2022 focused on the impact of MDR and the application of commercial rates of SDLT to mixed-use property, the Government has decided to completely abolish SDLT MDR from 1 June 2024. This policy decision is on the basis that MDR no longer supports its original objectives, and is open to abuse.

In addition, there will be changes to the SDLT reliefs for registered providers (RP) and first time buyers (FTBs). From 6 March 2024, RP relief will be adapted to remove uncertainty for the availability of the relief for RPs purchasing property using public subsidy. From 6 March 2024, individuals purchasing leasehold property through a nominee or bare trustee will also be entitled to claim FTB relief. Also, public bodies will be removed from the scope of the 15% rate of SDLT for acquisitions of high-value residential property acquired by non-natural persons.

This set of proposals does not impact land and buildings transaction tax or land transaction tax, which are devolved taxes paid on the acquisition of property in Scotland and Wales respectively. Both of these devolved taxes will, for now, retain their respective versions of MDR and FTB relief.

Our comment

The removal of the MDR has come as a surprise, although it was one of the potential outcomes from HMRC’s consultation.

In practice, for large acquisitions in the private-rented sector, whilst MDR would be a consideration, most transactions would qualify as non-residential on the basis that the transaction involved the acquisition of 6 or more dwellings. This is often as good or even more advantageous than a claim for MDR, particularly if the 3% higher rate of SDLT for additional dwellings is factored in. Scotland has the equivalent 3% higher rate for additional dwellings (HRAD), so the same applies.

MDR, however, is extensively used by investors in the student accommodation sector. These properties would not be treated as a dwelling for the purposes of the 3% HRAD and so the lower ‘normal’ residential rates of SDLT would apply, and may even limit the SDLT payable to 1% of the chargeable consideration. With the abolition of MDR, the non-residential rates of up to (currently) 5% will apply, instead.

The examples above are of MDR claims which are aligned to the original policy objective. MDR, however, has become increasingly used in the residential conveyancing market, usually for high-value property transactions involving a main dwelling and other ‘subsidiary’ dwellings on site (for example a granny annexe, cottages, or other out-buildings). HMRC’s consultation raised a concern that MDR was being mis-used and applied contentiously in these situations. It has resulted in a number of cases which stretch the definition of a ‘dwelling’ in order to facilitate a claim for MDR to reduce a purchaser’s SDLT liability. With the Government’s decision to abolish the relief altogether, the consultation’s objectives will certainly be achieved, but it will also impact UK taxpayers claiming MDR in line with its original policy objective.

It should be noted that the Government has decided not to change its approach to the treatment of SDLT for ‘mixed-use’ property which will attract the non-residential rates of SDLT. An apportionment rule will not be introduced.

The adaptation to the relief for RPs is welcomed. Whilst RP relief has existed for some time, the legislation did not always accommodate for modern commercial fact patterns and the updates remove uncertainty in the application of the relief for local authorities or where public subsidy is being recycled.

The amendment to FTBs relief is narrow but serves a useful, social purpose and is a welcomed addition to the legislation.

Taxation of second homes

Two changes are being made, which aim to increase tax revenues and increase the supply of housing by discouraging short-term lettings and incentivising the sale of second homes. The first measure removes the ‘furnished holiday lettings’ tax regime. The second reduces the higher rate of capital gains tax from 28% to 24% on gains realised on disposals of residential property.

Furnished holiday lets

Many second homeowners and landlords letting their properties on short-term tenancies, use the furnished holiday letting (FHL) regime. This enables them to deduct the full cost of their mortgage interest payments from their rental income and claim for a broader range of repairs and maintenance costs. FHLs can also benefit from being treated as ‘trading’ assets for capital gains tax (CGT) purposes, meaning a variety of reliefs are available. Gains on the disposal of FHLs have been eligible for holdover relief to defer gains on gifts, business asset disposal relief is available to reduce the rate of CGT to 10% in appropriate cases and rollover relief is available to defer CGT on the disposal of FHLs if acquiring other qualifying assets such as more FHLs.

From April 2025, the FHL regime will be withdrawn, meaning that there will be parity of treatment between short and long-term lettings moving forward. Anti-avoidance rules will accompany the change in legislation to prevent property owners from engineering disposals of their properties to take advantage of the current reduced rates of CGT that apply to FHLs. ‘AirBnB’ owners will be affected by the change, as will farmers and landowners who have converted surplus farmworkers’ cottages into holiday homes. Bed and breakfasts, guest houses and hotels are unlikely to be affected by the proposed changes.

Reduced rate of capital gains tax on sales of residential homes

In an accompanying announcement, which came as somewhat of a surprise, the Chancellor announced a reduction in the rate of capital gains tax applying to residential property.

Currently, the higher rate of CGT on gains on disposals of residential property by individuals is 28%. For disposals from 6 April 2024, however, the rate of tax will be reduced to 24%. Main residence relief will continue to apply for disposals of an individual’s main residence and the lower 18% rate, which applies to the extent that gains fall within an individual’s basic rate band, will also continue to apply.

Our comment

A mixed bag for landlords today. On the one hand, a reduction in the CGT rate will be welcomed, particularly as recent Budgets have seen a more singular direction of travel towards increasing the tax burden on landlords.

Those currently benefiting from the FHL rules will, however, suffer the impact of the changes from April 2025. Specifically, the loss of relief for interest on borrowings, could have a significant bearing on the overall tax liability and this may affect the commercial viability of some property business models.

The FHL changes were perhaps not unexpected given concerns around the need to redress the balance in areas suffering a perceived housing bottleneck for local residents and workers. The reduction in CGT, however, was not trailed in advance of the budget.

It does remain to be seen how much of an impact either of these changes will have in driving behaviour. In particular, how far it creates additional capacity in the property market, given that FHLs represent a small percentage of second homes. Property remains an attractive asset class both in terms of yield and capital returns, with the concern that higher tax costs could lead to higher rents as landlords look to preserve those post-tax profits.

For more Spring Budget 2024 analysis

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.

Tax legislation

Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2023/24.