UK 2024 October Budget: Key Considerations for the Residential Property Market

On October 30th, the Labour government introduced its first Autumn Budget since taking office, marking a pivotal moment for the UK’s economic strategy and housing market. With the economy under pressure from inflation, high interest rates, and a purported £22 billion financial gap, this Budget is set to address complex challenges. Rachel Reeves highlighted the difficulties of reversing decades-old fiscal issues and, while the Government has committed to leaving income tax, VAT, and National Insurance (for employees) rates unchanged, other taxes, including Capital Gains Tax (CGT) and Stamp Duty, have seen shifts likely to impact the housing market.

Key Budget Expectations for the Housing Market

The Budget has introduced the highest tax rise ever estimated at £40 billion, signalling a cautious approach to fiscal management, which may create fluctuations in the housing market. Increased Capital Gains Tax on the sale of assets, alongside an unchanged Stamp Duty relief, means that both sellers and buyers have new considerations when moving into the Property market. This Budget reshapes the tax implications associated with property investment, especially for second-home owners, buy-to-let investors and first-time buyers.

Impact on First-Time Buyers

For first-time buyers, the absence of any extension to the Stamp Duty relief comes as no shock. However, if unchanged, Stamp Duty rates will revert to their previous thresholds by April 2025, dropping the nil-rate band from £425,000 to £300,000. The loss of this relief will impact first-time buyers who are already facing high home prices and increased borrowing costs. Under these new thresholds, first-time buyers purchasing homes between £500,000 and £625,000 will lose eligibility for Stamp Duty relief entirely, potentially deterring some new entrants to the market.

With affordability already a pressing issue, this could dampen the outlook for the first-time buyer market, making government-led schemes that address affordability even more critical.

Impact on Buy-to-Let Investors and Landlords

Capital Gains Tax rates on residential property have remained unchanged with the lower rate remaining at 18% and higher rate remaining at 24%. Although there are some exceptions, for example main homes with grounds of over an acre, most owner-occupied homes qualify for private residence relief and are therefore exempt from any capital gains tax.

However, the Stamp Duty surcharge on second homes has risen from 3% to 5%. For landlords considering a sale, these changes increase the tax burden, potentially leading to more landlords exiting the market or a rise in rent.

These shifts come as new legislative requirements are being brought into place which are designed to cut-down on rogue landlords and protect tenants but may lead to some legitimate landlords being deterred from the market. The Renters Reform Bill aims to bolster tenant rights but may increase costs to landlords. if rental property stock declines due to these policies, rents may climb further, intensifying affordability challenges for tenants.

Affordable Housing Initiatives

On a more positive note, the Government has allocated an additional £500 million to the affordable housing budget, which now extends through 2026. These measures could provide temporary relief for some segments of the population. However, social housing providers have been allowed to increase rent above inflation.

Speculation about a potential overhaul of the council tax system is ongoing, including a potential shift to a flat 0.5% rate based on property value, though no definitive measures were announced. If implemented, such changes could provide a more equitable council tax system but may not significantly alleviate challenges for prospective homeowners.

Conclusion

The 2024 October Budget introduces meaningful changes to the residential property market, particularly for first-time buyers and landlords. Adjustments to the Stamp Duty Surcharge and the Renters Reform Bill are likely to encourage a careful approach among investors, which may reshape rental supply and influence rental costs. For first-time buyers, the return of higher Stamp Duty rates by April 2025 could mean a more challenging pathway to ownership.

As these fiscal changes take shape, Pinney Talfourd is prepared to help clients navigate this shifting landscape with expertise in conveyancing and Property law. Our team is dedicated to guiding property owners, buyers, and investors in making well-informed decisions amidst the evolving market.

For those seeking clarity on how the recent Budget may impact their property transactions, Pinney Talfourd offers tailored advice and support in navigating these changes. Contact us today to schedule a consultation and gain expert insight into your residential property needs.