Autumn Budget 2024: Will everyone be a winner in the property world?

Here is our round-up of what our new Chancellor, Rachel Reeves, announced on Wednesday 30^th October.

Landlords and tenants

Allison Thompson, National Lettings Managing Director of Leaders Romans Group (LRG - which we're part of), was hoping that even if there is a rise in Capital Gains Tax, landlords will see that “it may now be more profitable to continue letting, rather than exit the market”.  She also hopes that “if landlords are expected to upgrade older properties to meet EPC standards by 2030, then support measures will be introduced now to make these upgrades feasible. Without assistance, many landlords will face prohibitive costs, which could ultimately reduce the number of available rental properties.”

Buyers and sellers

Kevin Shaw, National Sales Managing Director for LRG, builds on Allison’s thoughts and says that “to date at LRG we haven’t experienced a mass exodus of landlords this year”. And without extended help for first-time buyers in stamp duty, “we may well see a rush of exchanges in March.”

Shared Ownership

According to Adrian Plant, New Homes Director, at SOWN: “The demand for shared ownership is only set to increase, and it’s crucial that new developments incorporate a mix of tenures to support diversity and sustainable communities.”  We will be looking for shared ownership to be part of the planned 1.5 million number of new builds.

Delivery of affordable homes

Lawrence Turner, Director at Boyer, likes that the government is already supporting the delivery of more homes – especially affordable homes. The £500 million housing package announced will help deliver 5,000 more social homes, while changes announced to Right to Buy to reduce the discounts and allow 100% of receipts to reinvest in social housing is a step in the right direction. But Laurence’s biggest hope from the budget was ‘for greater investment in local planning authorities’ (LPAs), who have been ‘grappling with decreased resources and expertise’.

The good news is, from a property perspective, particularly when you take into account the economic news – inflation, base rates and mortgages – the news isn’t too bad at all. And for some, it’s actually very good news!

Summary of key changes

Benefit payments

Although there weren’t any major changes to benefit payments, there was good news for carers. The weekly earnings limit will be increased to the equivalent of 16 hours per week at the National Living Wage, meaning carers can earn over £10,000 a year while receiving Carer’s Allowance, allowing them to “increase their hours where they want to and keep more of their money”.

Income-related tax

There were some unexpected positive announcements for ‘working people’ – especially those who earn the least, many of whom rent. So this is good news for tenants and landlords, as it should hopefully improve affordability:

1. Personal allowance and tax band thresholds will be unfrozen from 2028. Although no-one will benefit now, this will help increase everyone’s housing affordability in a few years.
2. The minimum wage will rise from £11.44 to £12.20 per hour from April 2025 for over 21s, which is a 6% increase. For younger workers, aged 18-20, there will be a big rise from £8.10 to £10 an hour - and the plan is to eventually match it with the over 21 rate.

National Insurance

We had all heard that National Insurance contributions would rise for employers, although the lowering of the threshold was not necessarily anticipated. But, while this is likely to hit some businesses in terms of fewer staff being hired and potentially some being ‘let go’, the reality is that these changes were mostly aimed at large companies, not smaller ones. In fact, smaller companies are being supported with potentially lower National Insurance rates:

• Employee NI will remain the same
• Employer NI will rise from 13.8% to 15% and the threshold to pay will be reduced from £9,100 to £5,000 from April 2025.
• Smaller companies will benefit from the Employment Allowance being increased from £5,000 to £10,500 - and with the £100,000 eligibility threshold being removed, all eligible employers will see this benefit.

Rachel Reeves said, “865,000 businesses will pay no NICs at all, and more than half of employers with NIC liabilities will either see no change or will gain overall next year.”

Capital Gains Tax (CGT)

Perhaps the biggest worry, especially for millions of landlords, was a rise in CGT. However, there was no change to CGT for property, which remains at 18% for lower-rate taxpayers and 28% for those in the higher-rate bracket.

However, for those selling other assets, such as shares, it is set to rise:

• For lower-rate tax payers, from 10% to 18%
• For higher-rate tax payers, from 20% to 24%

Inheritance tax

Changes to inheritance tax will increase the tax revenue quite substantially. The key change is that inherited pensions will be included in inheritance tax calculations from April 2027.

For those with assets over £1m that are business and agricultural property-related, from April 2026 IHT will attract a 50% relief, giving an effective rate of 20%. That means those inheriting farming estates will feel the pinch, as they are currently exempt from IHT but will now be taxed at 20% on the value above £1m.

The current IHT thresholds will be extended for two more years, until 2030, meaning the first £325,000 of any estate can be inherited tax-free until then. After that point, it is taxed at 40 per cent.

If you are looking at inheritance tax and planning for the future, do always talk to an independent tax advisor to get personal advice that’s tailored to your personal circumstances. This is especially important now, as the Chancellor did mention they would be cracking down on tax evasion and avoidance, with the aim of raising £6.5 billion.

Stamp Duty Land Tax

Perhaps the toughest tax rise is for would-be property investors or those considering expanding their portfolios. SDLT on ‘additional properties’ – that’s second homes and investment properties - will rise from 3% to 5% from midnight following the budget, i.e. from 31^st October 2024. While this may seem harsh, the additional rate is already 6% in Scotland.

VAT

This tax remained unchanged – although the application of VAT to private schools was implemented.

Fuel Duty

Perhaps another welcome surprise was the current freeze and 5p reduction on fuel duty was extended for the next tax year.

Non Doms

As expected, the relief Non Doms receive is being scrapped from 6^th April 2025.

Major investment in New Build

The Chancellor announced some big spending to help support the housing sector, primarily the social sector:

1. £500mn additional budget for affordable homes
2. Ability for social home providers to increase rents by CPI +1%
3. Additional support for transport and infrastructure which will lead to more new homes being built

There was, at this stage, no mention of changes to pensions, VAT or, for the next year, Corporation Tax. 

What impact will the Autumn Budget have on those in the property market?

Private landlords

This budget will be particularly hard for those looking to invest for the first time in a second property or, indeed, for landlords wanting to expand their portfolio. This is due to the new 5% SDLT rate applied to additional properties – on top of the ‘standard’ residential purchase tax.

The change in SDLT may possibly see potential investors currently in the pipeline to purchase, reverse out, again putting more pressure on the PRS and reducing choice for tenants.

Having said that, property has always been a long-term investment and, over time, price inflation and yields have typically delivered good returns to investors. SDLT is a one-off tax paid when you buy a property – but this is a cost that can be deducted from capital gains tax when you sell. So, just as the first introduction of a higher rate for SDLT impacted initially on investment, over time it’s just accepted as a cost of investment.

The big ‘win’ for existing and future landlords is that CGT for property investors - for this budget at least - has remained the same, and wasn’t changed to match income tax rates.

Tenants

At the moment, the budget headlines suggest that nothing is being done to financially support tenants, especially those hoping to get on the ladder. However, the Government is in the process of pushing through legislation to give tenants in the private sector strengthened rights via the Renters Rights Bill.

Sadly, the rise in SDLT from 3% to 5% could restrict private investment in much-needed additional homes to rent, which will mean the current pressure on tenants to find a home and rent rises are likely to continue. This is particularly true in areas such as London and Bristol, where demand is vastly outstripping supply.  

First-time buyers

During this budget, there was no support announced to help FTBs get on the ladder. However, the fact that inflation is expected to hover around the 2% target and the base rate is forecast to fall - hopefully followed by mortgage rates - should improve FTB affordability. The current SDLT holiday, which means FTBs don’t pay any purchase tax up to £425,000 hasn’t been extended past 31^st March 2025.

However, don’t rush to buy before this date because many buyers have ended up paying more for a property in the past than they would have saved if they’d only waited until after the SDLT holiday ended!

Affordable homes

According to Shelter, over 1.3 million households are eligible for a social home that hasn’t been built for them. As a result, many are renting in the Private Rented Sector, which, of course, doesn’t benefit from social homes subsidies.

The good news for this sector – and those who wish to move into it - is that fewer homes should be sold via Right to Buy, leaving more much-needed social homes in the sector. In addition, 100% of any Right to Buy home sale receipts will be kept by the council to reinvest in more housing.

People trading up and down

As with FTBs, there was no particular help offered to those buying or selling a home. But the better economic circumstances and more buoyant property market in most places should mean we continue on a good trajectory for the rest of the year and into 2025, making it easier for fairly-priced properties to be bought and sold.

Overall, this was a good budget for most involved in the property market. A stable economy, which is growing year by year with rising incomes improving affordability for housing – be it rented or owned – on top of more investment in social housing for those in need, is a good sign that this government is prioritising its support for the property market.