On 30th October, Rachel Reeves, the Chancellor of the Exchequer, will announce the new government’s 2024 Autumn Budget. In this budget, the government will outline their goals for economic growth and stability, as well as how they plan to balance their books through personal and business taxes.
The new government has promised not to increase Income Tax, National Insurance contributions, or VAT rates; however, nothing has been mentioned about Capital Gains Tax, so a rise in its rate seems likely. The government may also address Stamp Duty, as the threshold for first-time buyers is due to decrease in March next year.
Whether you are buying a house for the first time, selling your current home and buying another property, or adding to your property portfolio, you may want to know how this upcoming budget could impact you.
Landlords and Property Developers
As the government seeks to address the ‘£22bn black hole’ in the nation’s finances, we can expect a rise in Capital Gains Tax (CGT) rates. CGT is the tax on profit made when selling an asset, such as property.
If you’re a landlord or developer, this could mean making less profit when selling buy-to-let properties or completing property flips. An increased tax on profits could discourage sales in the new season, which may result in fewer properties coming onto the market. We may also see a temporary surge in market activity before the budget is announced, as people rush to sell before a potential tax increase.
Additionally, landlords and developers already face higher Stamp Duty rates compared to those purchasing primary residences. Stamp Duty is the tax paid when buying property or land, with an additional 3% surcharge on second homes or buy-to-let properties.
If you’re buying commercial property or land for development, different Stamp Duty rates apply compared to residential properties. However, there may be specific reliefs available for developers, particularly for larger developments or certain types of projects, such as hospitals.
Any changes to Stamp Duty in the Autumn Budget could affect landlords and developers, whether through rate adjustments, new thresholds, or reliefs. For example, a reduction in the additional Stamp Duty rate could encourage more buy-to-let investment.
First-Time Buyers
As a first-time buyer, you currently benefit from a higher Stamp Duty threshold.
As of 2024, you pay no Stamp Duty on properties costing up to £425,000. For properties between £425,000 and £625,000, you only pay Stamp Duty on the amount above £425,000. If the property costs more than £625,000, you no longer qualify for first-time buyers’ relief.
This threshold is set to return to a lower level in March 2025, but it may be addressed in the Autumn Budget due to ongoing concerns about housing affordability across the UK.
The new government may consider extending first-time buyer Stamp Duty relief, particularly if Capital Gains Tax rates increase. An increase in CGT could result in fewer properties being put on the market, as current owners or developers may be less inclined to sell. Reduced availability could drive up house prices to meet consumer demand. Therefore, maintaining or even increasing the Stamp Duty threshold for first-time buyers would help you enter the market more easily.
Second-Time Buyers and Sellers
If you are selling your current home and looking to buy another, you may be wondering how the Autumn Budget could affect you.
Although there are rumours of rising Capital Gains Tax, you may qualify for Private Residence Relief if you are selling your primary residence, which would reduce or eliminate any CGT liability.
This relief could reduce any urgency to sell if you are considering moving, but as a buyer, you might start to see more properties on the market as sellers rush to complete transactions before any potential CGT increase. Sellers may want to maximise profits before the budget is announced.
You could benefit from this temporary boost in market availability and competitive pricing. However, if CGT rates do increase, fewer properties may be available post-budget, potentially leading to higher prices.
As a second-time buyer, you won’t pay Stamp Duty on a house priced under £250,000, but you will be taxed at a certain percentage depending on the price of the property. There has been speculation that the government may increase Stamp Duty thresholds, which could stimulate the market by making housing more affordable.
When the government announces their plans, it will likely influence market dynamics, so it is crucial to stay informed and understand how these changes may affect you.
Our blogs and articles are correct at the time of writing.
These have been created for marketing purposes only and should not be considered as legal advice.
