Why owning a second home is no longer worth it

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The Chancellor’s tax reforms may also do little for first time buyers



Jeremy Hunt sent a clear message to Britain’s second home owners in his Budget this week: sell up to make way for first-time buyers.

The Chancellor laid out plans to abolish tax relief for holiday let owners, scrapped stamp duty discounts for multiple home purchases and encouraged second homeowners to sell by cutting capital gains tax.

Critics say the reforms will make second home ownership the preserve of the very wealthiest and may do little to help ease the housing crisis for young buyers.

However, after years of bad news for property investors, is it now finally time to sell up – or is there still money to be made out of bricks and mortar in Britain?

In his Budget on Wednesday, Mr Hunt seemed to give with one hand and take with the other. He slashed the higher rate of capital gains tax (CGT) on property from 28pc to 24pc, a potential saving of nearly £4,000 on a £100,000 gain – depending on a seller’s income.

But the CGT tax-free allowance is also set to halve next month – from £6,000 to £3,000 – having steadily been reduced over the past few years.

For second homeowners who let their properties to holiday goers, Mr Hunt threw in yet more incentives to sell. From April 2025, the “Furnished Holiday Lettings” regime will be no more. It has allowed holiday let owners to claim full mortgage interest relief and enjoy more generous tax treatment on capital gains than private landlords.

The Treasury is banking on more landlords and second homeowners selling up so more stock is freed up for “those looking to get on the housing ladder for the first time”.

The Chancellor also decided to get rid of Multiple Dwellings Relief (MDR), which will penalise those trying to buy properties with an annex – which count as two dwellings – potentially setting families back by tens of thousands of pounds.

Chris Etherington, of tax adviser RSM, said holiday let owners in particular will undoubtedly sell up over the next year.

Especially now they are faced with the prospect of no longer benefiting from Business Asset Disposal Relief, which lets them pay just 10pc tax on profits from a sale rather than 24pc.

Mr Etherington said: “It’ll be a no-brainer. That, and the prospect of no more mortgage interest rate relief, which will make it harder to afford to run these properties.

“We could see a bit of a mad rush of owners banking the 10pc tax rate while they still can. It’s a double win for the Treasury. It will lead to more people paying CGT, and light the spark for more property transactions – pushing up stamp duty land tax receipts.”

For second homeowners, the squeeze is already being felt. Local authorities now have the power to double their council tax bills, and the 3pc stamp duty surcharge – introduced in 2016 – has increased upfront costs.

This is why thousands now let their homes to holiday goers when they aren’t there, to benefit from the more generous tax regime Mr Hunt is about to end.

Ben Edgar-Spier, of Sykes Holiday Cottages, said holiday let owners “have been unfairly scapegoated in the guise of controlling rising house prices and availability” in Mr Hunt’s Budget.