The property sector is a continued focus for HMRC’s legislative tax changes, together with HMRC having access to information in greater amounts and much more detail than ever before.

HMRC has been targeting the property sector as part of its continued ‘nudge letter’ campaign. Recent letters have been issued to estate agents and landlords to remind them of their reporting requirements, as well as to offshore companies regarding ATED filings/filing requirements. This shows that HMRC has identified the industry as one in which tax is potentially being lost, necessitating its intervention. We have also seen HMRC issuing data holder notices to companies involved in property letting, requiring the provision of information about the underlying properties and landlords.

In addition to this, the Government has continued to update its legislation in respect of property taxes, showing a continued interest in the space. A summary of the recent legislative changes is included here:

Stamp Duty Land Tax (SDLT)

• The current first-time buyers’ threshold for relief of £425k will be reduced to £300k in April 2025, meaning properties that cost more than £300k will attract SDLT on the excess up to £500k at a rate of 5%. The maximum property value for first-time buyers’ relief is also being reduced to £500k, from £625k.
• A new 2% rate will apply to residential property purchases (if it is your only residential property after purchase) on the value between £125,001 and £250,000 from April 2025. Unless First Time Buyers’ Relief applies, this will introduce an additional charge of circa £2,500 on most property purchases.
• Since 31 October 2024, the SDLT for individuals who have purchased additional residential properties has increased from 3% to 5%, and similar changes are made for companies and other non-natural persons.  On the same date, there was also an increase in the single rate of SDLT payable by companies and non-natural persons buying residential properties over £500,000, from 15% to 17%.

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) regime will effectively be abolished from 1 April 2025.

The changes have removed tax benefits, including: exemptions from finance cost restriction rules, capital allowances reductions, access to relief from taxes on chargeable gains for trading business assets and inclusion for income as relevant UK earnings when calculating pension relief.

Anti-forestalling provisions were introduced, from 6 March 2024, to prevent obtaining a tax advantage through use of conditional contracts.

If you receive a letter or identify a potential issue

With HMRC’s focus in mind and the high-quality information in its possession, receiving a nudge letter or enquiry for those in the property sector has never been more likely.

We recommend taxpayers immediately seek professional advice following receipt of a nudge letter or statutory enquiry, or where an individual has found a mistake or omission in their filings to HMRC.

If HMRC subsequently opens a statutory enquiry and finds an error, failure to take action following receipt of a nudge letter can lead to higher penalties being charged.

Where you have identified an error in your tax affairs, irrespective of whether you have received a nudge letter, you should consider making a voluntary disclosure to HMRC. With respect to income from property, HMRC has a dedicated disclosure service, named the ‘Let Property Campaign’, in which all property income disclosures can be made to bring about a clean slate going forward.

Here at HaysMac, we have a wealth of experience in dealing with disclosures of all sizes. We have assisted many clients in making disclosures to obtain the most favourable result, in line with their goals including the mitigation of penalty charges This allows a line to be drawn under the matter and the client is able to move forward with a clean slate.

If you or a client would like more information on HMRC’s property sector activities or have received a communication from HMRC, please contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.