Spring Budget: How does it impact trusts and property?

On 6th March 2024, the chancellor Jeremy Hunt’s Spring Budget featured tax changes of interest to trusts which hold property investments.

From 6th April 2024, the rate of Capital Gains Tax on residential property gains is falling from 28% to 24%. In addition, the Furnished Holiday Lettings regime will be discontinued on 5th April 2025.

Capital Gains Tax

The chancellor expressed the hope that the 4% reduction in the capital gains tax rate would incentivise sellers and stimulate the residential property market.

Trustees with a sale currently in progression should consider if Capital Gains Tax would be saved in their particular circumstances if exchange of contracts is delayed until after 5th April 2024 - bearing in mind the maximum annual exemption available to trusts halves to £1,500 from this date.

Furnished Holiday Lettings

The abolition of the Furnished Holiday Lettings regime on 5th April 2025 removes the current incentive where location permits for landlords to offer holiday lets rather than longer-term home rentals.

Trusts offering Furnished Holiday Lettings have been eligible in the past for tax favourable treatments such as the ability to claim capital allowances, interest deductions at the full marginal rate of tax, and capital gains tax on disposal of as low as 10%. These will be withdrawn, and there will also be an anti-forestalling rule put in place which will apply from the Budget date with the aim of preventing tax planning in anticipation of the rule change.

The removal of these tax advantages may lead some trustees to consider redeploying their capital into other types of property or investments.

You can read more about Spring Budget 2024 here. If you need advice about the topics above or any other aspect of using trusts, please contact Paul Mitchell, Sarah Wood, or any other member of our nationwide trust team.

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