Autumn Budget 2024 and what it means for the property market

So the long awaited Labour autumn budget has landed but what does it mean for the property market? 

Here are the key takeaways and what likely comes next. 

Stamp duty increased to 5% on second homes

Higher stamp duty thresholds remain in place for first time buyers and home movers until April 2025, but are set to be lowered after then

Capital gains tax increased but rates on residential property sales to remain at 18% and 24%

£500m pledged for affordable housing

For the first time in 14 years Labour have announced their first budget. The countries first female chancellors Rachel Reeves made clear that she has inherited a "dire" situation from the Conservatives and had difficult decisions to make in order to fix the foundations of the UK's economy. 

Overall taxes were raised by £40bn, the higher end of economist predictions. The largest of those taxes will generate £25bn and this comes from increased N.I contributions from employers. A further £9bn to be generated by increased stamp duty for second homes, increased capital gains tax, and closing tax loopholes like the non dom status.

Stamp duty on additional homes increased from 3% to 5% coming into effect immediately meaning those looking to purchase an additional home will now have to pay an extra 2% of the properties entire value. 

Second-home stamp duty is now at 5% meaning a change from the previous 3% as listed below. 

For the portion between £0-£250,000 rates are now 5%

For the portion between £250,000-£925,000 stamp duty is 10%

For the portion between £925,000-£1.5m stamp duty is 15%

For the portion above £1.5m stamp duty is 17%

There is a higher chance that property agreed sales will now either fall apart or be re-negotiated by the buyer for those purchasing as additional homes. The move has certainly unsettled property investors, especially with the fears around the rent reform act already increasing the number of investment properties (former rental property) on the market which currently makes up 12.5% of the total property sales market. 

Zoopla's Executive Director of Research, Richard Donnell, says: ‘The private rented sector has seen static supply since tax changes were introduced in 2016. There is a steady net selling by landlords in response to changes in tax policies, alongside greater regulation of housing and higher mortgage rates. 

‘We need to keep as many landlords as possible in the market to provide choice for renters who are currently facing limited options.  Rents rising faster than earnings is hitting those on the lowest incomes the hardest.’ 

Reeves said this increase has been made to support people buying their first home or moving home, and kept the current raised stamp duty threshold in place for first-time buyers and home movers until April 2025.

Stamp duty threshold for first time buyers and home movers held until April 2025

First-time buyers will continue to benefit from a raised stamp duty threshold until April 2025, meaning they won’t have to pay any stamp duty on properties costing up to £425,000. However, from next April, the stamp duty threshold will be lowered to £300,000.

For now, for properties costing between £425,000 and £625,000, first-time buyers will need to pay 5% tax on that particular portion of the property. And for properties costing over £625,000, normal stamp duty rates apply.

But from April 2025, first-time buyers will need to pay stamp duty of 5% on the portion of the property between £300,000 to £500,000.

For home movers selling their home to buy their next home, the stamp duty threshold of £250,000 also remains in place until April 2025: 

For homes costing over £250,000 you'll need to pay 5% on the portion up to £925,000.

For homes costing over £925,000, you'll need to pay 10% on the portion up to £1.5m.

And for homes costing over £1.5m, you'll need to pay 12% on the portion over £1.5m.

However from April 2025, the stamp duty threshold for home movers will be lowered to £125,000 and 2% stamp duty will need to be paid on the portion between £125,000 and £250,000.

Capital Gains Tax increased but rates on property left untouched

Capital Gains Tax is the tax charged on profits made from the sale of assets, including second homes. and the chancellor has now increased Capital Gains Tax for lower rate taxpayers (those earning under £50,270 a year) from 10% to 18% and the rate for higher rate taxpayers (those earning over £50,270) from 20% to 24%.

However, the rates on residential property sales will remain at 18% and 24%.

"This means the UK will still have the lowest capital gains tax rate of any European G7 economy," - Rachel Reeves

Inheritance tax rules for property held until 2030

The inheritance tax rules for property will remain the same until 2030.

In its current form the first £325,000 of a property’s value can be inherited tax-free. This rises to £500,000 if the property is passed on to direct descendants: children and grandchildren.

And £1 million if a property is passed onto a spouse and then inherited by direct descendants.

However, the inheritance tax rules are set to change when it comes to inherited pensions from April 2027, when unused pension funds and death benefits will be included within the value of a person’s estate for inheritance tax purposes. The change will have an impact on agricultural holdings where assets including machinery can easily surpass the £1m threshold causing worry for british farmers who already struggle to turn a profit making it more likely upon their death their children will be unable to pay the inheritance tax and thus force them to sell the family business. 

£500 million for affordable housing

The chancellor has also announced £500m for affordable housing a part of a total £5bn pledged to deliver 33,000 new homes to boost supply of social housing and support home builders. 

2000 homes have been earmarked for liverpool docks already and further development in cambridge. This alongside a commitment to reduce the right to buyer discounts to try and keep more council homes within the sector. 

Naturally there is a lot to take away from this budget but we will keep an eye on things and update you again as we navigate the property market through these changes.