IMLA: Budget response

Following Jeremy Hunt’s announcement regarding the removal of the Furnished Holiday Lets (FHL) scheme, Kate Davies, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), comments:

“Removing the FHL regime is perhaps a defensible tax grab, in that it will go some way to help level the playing field between short-term holiday lets and other types of tourist accommodation such as hotels and B&Bs.

“But if the aim is to help tackle the housing shortage in holiday hotspots, where buy-to-let landlords have been converting to holiday lets in their droves due to considerably lighter regulation, more generous tax perks and the potential for increased income, there are far more impactful measures the government could deploy.

“Easing the tax burden on landlords would encourage them to remain committed to the sector. In the short term, IMLA would like to see a review of the changes to mortgage interest relief and the additional 3% Stamp Duty charge to support landlords in continuing to provide the homes on which 20% of UK households rely. In the long run, of course, the only way to overcome the housing shortages which plague our country is for the government to commit to supporting an ambitious, sustainable programme of housebuilding, for social and private rental and purchase.”

“The Chancellor's announcement that Capital Gains Tax will be reduced from 28% to 24% for higher or additional rate taxpayers selling a residential property is little more than a sop to those landlords forced to exit the private rental sector by tough economic conditions and a punitive taxation system. And not even much of a sop, given that the tax-free allowance for CGT is set to decrease from £6,000 to £3,000 in April this year.

“IMLA would like to have seen the Chancellor offer more support to the sector by announcing a reduction in the 3% additional Stamp Duty which has been levied on second and subsequent property purchases since 2016. This extra tax is an added financial burden on the private sector landlords who provide homes for 20% of the UK’s households, at a time when our research indicates they are anticipating an increase of 80% in their mortgage costs over the next two years. Given the dramatic imbalance between supply and demand in the private rental sector, which has pushed rents to record levels, an incentive to encourage landlords to invest in more properties and increase supply would have been very welcome.

“Instead, we got the contrary, with the abolition of Multiple Dwellings Relief (MDR). Jeremy Hunt freely admits this relief was aimed at encouraging investment in the Private Rental Sector, and government figures estimate that MDR was worth £730m to investors between 2016 and 2022. Scrapping this incentive is a surprising blow, at a time when the sector desperately needs support.”

Published: 06 March 2024