Labour’s first budget delivered by Chancellor Rachel Reeves may not have proven as
disastrous as many had feared, but it will likely have far reaching consequences for the UK
property market over the long term.
Below we break down some of the major points outlined in the autumn budget.
Stamp duty land tax
Stamp duty land tax
In a move that was widely predicted, the Chancellor introduced changes to stamp duty land tax, announcing that people who want to buy a second home will be hit with additional charges in a move the government believes will benefit first-time buyers. Reeves claims that this will result in another 130,000 property transactions for first-time buyers and people buying a primary home over the next five years.
Currently, buyers of homes worth less than £250,000 in England and Northern Ireland don't pay stamp duty (land tax is set separately in Scotland and Wales). This was doubled from £125,000 in September 2022. The threshold for those buying their first property is £425,000, which was raised from £300,000, but these higher thresholds will come to an end on 31 March 2025.
From the start of November the higher rates for additional dwellings went up from 3% to 5% for anyone who already owns a primary home, and is charged on top of the main stamp duty rate.
On a property costing £300,000, this means an extra £6,000 in tax. This 2% increase for additional properties will likely be felt more in areas like London and the South East, inevitably leading to higher rents, and will probably result in a smaller demand from second home buyers and investors. This will likely cause a further redistribution of investment towards the lower end of the price spectrum, and sway people away from the capital to the
regional markets growing in popularity.
Capital gains tax
Capital gains tax is a tax paid on the profit made when someone sells certain types of assets, including UK property. Reeves’ budget made changes to capital gains tax overall, but ultimately left the existing rates for residential property as they were. The rates for residential property will stay the same, at 18% and 24%, while the rates for the sale of other types of assets, including commercial property, are being increased.
This might ultimately benefit the residential property market, given that thresholds for the tax were frozen while it increased for other assets. This could lead to investors choosing to pursue more opportunities in the residential property market and ultimately will result in positive growth and likely returns.
Inheritance tax
In the lead up to the budget announcement some senior homeowners might have feared a cut in the inheritance tax reliefs available to them, but the current threshold remains in place after the budget announcement. This means that a couple do not pay tax on the first £1 million of wealth on their main home, and will hopefully add to the incentive for older property owners to downsize and pass housing wealth down through the generations to those who might struggle to get on the property ladder otherwise.
Regional areas grow in popularity thanks to government support
In a continuation of investment and regeneration plans that are widely benefitting certain
regional property sectors, Manchester and the West Midlands have been designated as
recipients of increased funding and support.
The government announced that ‘integrated settlements’ will be implemented for greater
Manchester and the West Midlands at the start of the 2025-26 financial year, along with four
other mayoral combined authorities, namely the North East, South Yorkshire, West Yorkshire
and Liverpool City Region.
This support continues to bolster demand for regional property outside of the capital which is
proving too competitive for many potential buyers and renters. With higher education, business and lifestyle developments continuing to flourish in areas like Manchester and the West Midlands, many investors are likely to explore these areas for opportunities that provide higher and more consistent rental yields and property appreciation in years to come.
Tailor my Property
As the autumn budget’s policies go on to influence the property market it is important to move ahead with caution and strategy so as to best protect your interests and investment goals. Tailor my Property has an extensive network of tax, property and investment professionals who can assist you with tailoring a strategy best suited to your unique market aspirations.
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