Spring Budget 2024 – tax update for residential properties

Chancellor announced reduction in the higher rate of Capital Gains Tax for residential properties from 6 April 2024.

The recent spring budget announced the higher rate of Capital Gains Tax (CGT) for residential property disposals will see a reduction from 28% to 24% effective from 6 April 2024. The lower rate of CGT will remain at 18% for gains that fall within an individual’s unutilised basic rate band (up to £37,700). This change is coupled with a reduction in the annual exempt amount (AEA) from £6,000 for the tax year 2023/24 to £3,000 for the tax year 2024/25, which is the tax-free amount of capital gains an individual is entitled to.

We’ll look at the impact on UK individual taxpayers, disposing of residential properties in this blog.

Basic rate taxpayers

While the lower rate of CGT remains frozen at 18%, the decrease in the AEA to £3,000 for the tax year 2024/25 poses a consideration. Selling your property after 6 April 2024 may result in increased tax liabilities, with an additional £3,000 being subject to tax at the lower rate of 18%.

Higher rate taxpayers

For higher rate taxpayers, planning could result in financial advantages. By postponing the exchange of the sale until the 2024/25 tax year, despite the decrease in the AEA, it’s still possible to reduce tax liabilities.

The table below compares the different CGT liabilities for an individual with a taxable income of £40K in 2023/24 and 2024/25 tax years, whilst the capital gain is £25K, £50K and £100K respectively.

Therefore, this recognises that individual circumstances vary, and each case warrants a thorough review. While this blog aims to prompt consideration about minimising capital gains liabilities, it's essential to seek personalised tax advice tailored to your specific situation.

It’s also important to remember that a separate capital gains tax return and payment are now due within 60 days of completion when a UK residential property is sold or given away. Penalties and interest will be charged if this deadline is not met.

This blog does not consider Furnished Holiday Lets (FHLs) as they have different rules which can apply. The spring budget also announced changes for FHLs, you can find the extra information on the updates to FHLs from the links below:

Please see our FHL flyer Furnished Holiday Lets update | Brochures | Larking Gowen (larking-gowen.co.uk)

Please see our FHL spring budget blog Is it time to panic? The answer is…not yet! | Blog | Larking Gowen (larking-gowen.co.uk).

Need Help?

If you’d like to discuss this in more detail, please get in touch with your usual Larking Gowen contact. You can find contact details in the Our People section of our website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Yinchao Zuo