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Spring Budget changes to capital gains tax and other budget issues

Wednesday 6th March 2024 was Spring Budget day.  Several changes were announced, including to national insurance, fuel duty, air passenger duty, alcohol duty, VAT registration, individual savings accounts and UK non-domicile tax regime.  Some of the changes that we feel may be of most interest to our clients are detailed below.

Spring Budget

Capital gains tax (CGT)

The higher rate of CGT payable on residential property will be cut from 28% to 24% from 6 April 2024.

CGT is payable on the profit made when selling a second or buy to let home.  The rate payable by basic-rate taxpayers is 18% and the rate payable by higher-rate taxpayers is currently 28% – soon to be 24%.

Everyone has an annual CGT-free allowance of £6,000, but this will be reduced to £3,000 from April 2024.  Sellers can offset the cost of the sale – e.g. legal and estate agent fees – against the capital gains tax payable.

After someone dies, their estate is also liable for CGT if there has been a gain on an asset between the date of death and its sale. It is always advisable to take professional advice in this instance to ensure that the gain is reported correctly. If you take advice prior to the asset being sold, there may also be ways to mitigate the gain.

Multiple dwellings relief

Currently, if you are buying more than one residential property in a single or linked transactions, the amount of stamp duty you pay can be based on the average price per dwelling. As the rate of stamp duty increases based on the property price, this can lead to a significant saving.

This relief will no longer be available for any purchases made after 1st June 2024.  Where a purchase is completed before 1st June 2024, or where contracts are exchanged before 6 March 2024, regardless of when they complete (as long as there are no amendments to the contract), the relief is still available.

Furnished holiday letting relief

Holiday letting tax relief will come to an end in April 2025.

Currently, landlords can claim capital gains tax relief and are eligible for allowances against items such as furniture and equipment if a property is available as a holiday let for at least 210 days each year and is actually let for at least half of that time.

British ISA and savings bond

A new ISA for stocks and shares in UK-listed companies will be available and will give an additional £5,000 tax-free allowance on top of the £20,000 tax-free allowance already available on ISAs.

Also, a new British savings bond will be available from NS&I, which will offer a guaranteed savings rate over three years.

Payment of inheritance tax before probate

Inheritance tax (IHT) must be paid within six months of a person’s death.  If it is not, interest is charged at 7.75% on late payments.

In some exceptional situations, where the personal representative (PR) is unable to pay the IHT, a ‘grant of credit’ may be obtained from HMRC.  However, these are usually only available where the PR has looked into other ways of funding the payment.

From 1 April 2024, PRs no longer have to look into funding the IHT liability via commercially available loans before applying for a ‘grant of credit.

Contact our private client department for information on any issue relating to probate and the administration of estates.

Contact our conveyancing department for information on stamp duty.

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