What The Autumn Budget 2024 Means For The Property Market

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What The Autumn Budget 2024 Means For The Property Market

Autumn Budget 2024 | The 2024 Autumn Budget has been announced by Chancellor Rachel Reeves. After months of speculation, Labour’s first budget since 2010 will raise taxes by £40 billion which the new Government believes will help grow the UK’s economy. The budget has introduced a slew of changes that will directly impact the property market. In this article, we will break down the autumn budget and explain its effects property investment in the UK. 

 

Tax Increases

 

The autumn budget has revealed £40 billion in tax adjustments that impact the property market:

 

Stamp Duty  

Stamp duty on the purchase of second homes is increasing slightly from 3% to 5%. This also extends to buy-to-let residential properties and companies purchasing residential property. This change comes into effect on the 31st of October. 

 

First-time buyers do not have to pay any stamp duty on properties costing up to £425,000. This threshold will lower to £300,000 in April 2025 and be subject to 5% stamp duty tax up to £500,000. 

 

Purpose-Built Student Accommodation (PBSA) remains a great property investment strategy, as it is usually exempt from stamp duty due to being under the threshold of £250,000

Capital Gains Tax

 

While Capital Gains Tax (CGT) has seen an increase, rates have remained the same for residential property. The rates for residential property remain at 18% and 24%. 

 

The lower rate has risen from 10% to 18%, while the higher rate has risen from 20% to 24%. 

 

Before the budget, many anticipated a change in Capital Gains Tax. Despite these increases, the UK continues to have the lowest CGT rate of any European G7 country.

 

Inheritance Tax

 

The inheritance tax threshold freeze has been extended by two years to 2030.

 

Currently, the first £325,000 of any inherited property is tax free. This rises to £500,000 if the property was passed down from a direct descendent. This threshold is £1 million if a property is inherited by a spouse or civil partner.

 

Non-dom status

 

The non-dom tax regime is to be abolished from April 2025. This applies to UK residents whose permanent home is outside of the UK, for tax purposes.

 

Chancellor Rachel Reeves has promised to introduce a brand-new residence-based scheme for those coming to the UK on a temporary basis.  Labour has chosen to extend the Temporary Repatriation Relief to three years, a government program to incentivise foreign capital to invest in the UK at a reduced rate.  

 

The broader economy

 

Public Investment

 

Rachel Reeves promised to ‘Invest, Invest, Invest’ to drive economic growth in the UK. In line with the Government’s pledge to build 1.5 million homes over their first term, Labour has promised £5 billion on housing investment in 2025-2026. Labour have pledged a further £3.1 billion to the Affordable Homes Programme to increase housing supply. 

 

Reeves set out the Government’s intention to invest in regenerations across the country, highlighting the Liverpool Central Docks as an area of increased investment, planning to deliver 2,000 new homes on the waterfront. 

 

Labour’s October budget announcement of increased investment offers reassurance to investors. The Government’s plans to address the rising housing demand creates more property investment opportunities, with the city of Liverpool spotlighted as a great location due to its ongoing regeneration. Liverpool’s waterfront is quickly becoming one of the most desirable off-plan development spaces in the UK, with the introduction of Everton’s new stadium on Bramley Moore dock and the ongoing housing developments.   

 

To read more about Liverpool’s property market: Liverpool Property Investment Market Overview 2024 

 

Inflation and Growth

 

The chancellor shared the Office for Budget and Responsibility’s (OBR) projections for inflation over the next five years. CPI inflation will average 2.5% by the end of the 2024, rise to 2.6% in 2025, and gradually drop to 2% by 2029. The OBR also forecasted GDP growth of 1.1% in 2024, 2% for 2025, 1.8% by 2026, 1.5% in 2027, 1.5% for 2028, and 1.6% in 2029. This stable projection could help create a more predictable rental market, aiding long-term planning and mitigating any fluctuations in the market. 

 

The national minimum wage will rise by 6.7% in April 2025 from £11.44 to £12.21 an hour. This wage rise will apply to 18–20-year-olds too, with their wage rising from £8.60 to £10 an hour. The increase to the minimum wage could help boost tenant affordability, potentially leading to higher rental demand and fewer vacancies. 

 

Additionally, National Insurance contributions by employers are to rise by 1.2%, growing from 13.8% to 15%. Businesses will now also have to pay National Insurance on workers’ earnings from £5,000, up from £9,100.

 

How Does the Autumn Budget impact the Property Market?

 

The 2024 autumn budget has highlighted the investment opportunities available in the property market. While it includes £40 billion in tax increases, these changes help create better services and infrastructure for the UK, ultimately benefiting the property market. 

 

With speculation that the 2024 autumn budget would bring a significant rise to CGT, it is reassuring that the rate remains the same for residential property. With the lowest CGT rates in the G7 and the UK extending the Temporary Repatriation Relief to three years, the UK remains a great place to invest.

 

While the 2% stamp duty increase applies to the purchase of second homes, this does not apply to the purchase of PBSAs. PBSA’s are usually priced below the stamp duty threshold of £250,000, making them a viable option for investors. 

 

Furthermore, the Government’s commitment to public investment and regeneration around the UK creates more opportunities for off-plan property investment. Labour’s plan to create 2,000 more homes offers investors a chance to capitalise on the Government’s public investment strategy, with the chancellor highlighting the Liverpool Central Dock as a key location receiving investment. 

 

The Government’s projections for the economy also provide an injection of optimism for investors. With the forecasts by the OBR predicting steady growth over the next five years, the rental market can see more predictability. This can lead to steady prices and rental demand, supporting long-term planning by buy-to-let investors.

 

With the increase in the minimum wage, renters will have access to more money which could help with their rent. With more disposable income, there could be a broader reduction in vacancy rates and increase in rental demand. Addressing the demand for housing also expands the opportunities for buy-to-let investors. 

 

The 2024 autumn budget has changed the property market, but Advantage Investment is here to help guide investors to an opportunity that works best for them. If you would like to get in contact with us, our team will provide you with the detailed insight you need to navigate the property market. 

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