Residential Property Gains – Higher Rate

It was announced that the CGT rate which applies to disposals of residential property which fall into the higher rate tax band would be reduced from the current 28% to 24% from April 2024.  The Chancellor’s rationale for this was to encourage more property sales, which should in fact result in more tax being collected than is currently the case.  The 18% rate which applies within the basic rate tax band will be unchanged.

Furnished Holiday Lets

It wasn’t all good news on the CGT front though – the abolition of the special rules for Furnished Holiday Let (FHL) properties will significantly restrict tax planning options available to owners of such properties.  Currently FHL properties can qualify for:

  • CGT Holdover Relief (meaning capital gains arising on a gift can be deferred);
  • Business Asset Disposal Relief (meaning gains realised on sale can be taxed at 10%), and
  • CGT Rollover Relief (meaning that gains arising on sale can be deferred by reinvesting into other business assets (and conversely FHLs will no longer be a qualifying asset for the purposes of reinvesting funds realised on sales of other business assets)).

These favourable rules will be abolished with effect from April 2025, although anti-forestalling provisions will prevent the use of unconditional contracts entered into on or after 6 March 2024 in order to accelerate the effective date of a property transaction (and therefore benefit from CGT reliefs). 

You can read more on the FHL changes HERE.

Non-Doms

As explained in more detail in our ‘Non-Doms’ section, taxpayers who are resident in the UK, but not domiciled here have previously been able to limit their exposure to UK CGT by realising capital gains offshore and not bringing the proceeds of sale back to the UK – this is known as the remittance basis. 

From April 2025 these rules will be reformed such that the remittance basis will be removed and UK tax residents will in broad terms pay tax on all worldwide gains (and income). 

New arrivals to the UK who have a period of 10 years consecutive non-residence will have full tax relief on foreign gains for their first 4 years of UK tax residency, and proceeds from overseas gains can be brought back to the UK without charge.  Relatively recent arrivals to the UK will also be able to benefit from full relief for their first 4 years of tax residency.    

Transitional rules will seek to soften the blow for existing non-doms, and these will include a rebasing for CGT purposes to values at 6 April 2019, and a reduced rate of tax of 12% on gains which arose before 6 April 2025 which are brought into the UK in 2025/2026 and 2026/2027. 

You can read more on the 'Non-Dom' changes HERE. 

Please click here to go back to our full Spring Budget 2024 analysis.