by Sam Akbay
On 30 October 2024, the UK’s first female Chancellor of the Exchequer, Rachel Reeves, MP, presented the first Labour Budget in 14 years, introducing significant policy changes with a £40 billion tax increase package. Here’s what buyers and sellers need to know about how this will impact housing and the property market.
Boosting Affordable Housing
Aimed at unlocking the housing market, the Budget promises a £5 billion investment to drive housing development. Key allocations include:
- Affordable Homes Programme: Increased to £3.1 billion, this expansion targets the availability of affordable homes for both buyers and renters.
- Small Housebuilder Support: £3 billion has been designated to boost the supply of homes by supporting smaller housebuilders.
- New Housing Initiatives: An additional £128 million has been committed to specific projects, such as addressing river pollution, which is currently delaying the development of up to 28,000 homes, and building 3,000 energy-efficient properties across the UK.
This investment represents a positive step toward addressing the housing shortage, though further details will be available in the upcoming Spending Review.
Stamp Duty Changes
For those looking to invest in a second home or rental property, there are notable changes:
- The Higher Rate for Additional Dwellings (HRAD) will rise from 3% to 5% starting 31 October 2024, impacting second-home buyers and property investors.
- The Treasury estimates this change could create a comparative advantage for first-time buyers, potentially generating 130,000 additional property transactions over the next five years.
While this increase might deter some investors, it aims to create more opportunities for primary homeowners.
Capital Gains and Inheritance Tax Updates
The Budget leaves Capital Gains Tax (CGT) rates for residential properties unchanged at 18% and 24%, offering stability for property sellers. However, Inheritance Tax (IHT) thresholds will remain frozen until 2030, a concern given rising property values. This freeze could impact estates that might not have previously qualified for IHT, potentially affecting family inheritances.
National Insurance and Wage Adjustments
To support workers, the National Living Wage will rise in April 2025, benefiting over 21-year-olds with an increase to £12.21 per hour. National Insurance contributions for employers will rise to 15%, potentially affecting smaller businesses, including property agents, as they balance rising costs with fair wages.
Social Housing and Right-to-Buy Reforms
The Budget addresses social housing with a CPI-linked annual rent increase, estimated at 2.7% for 2025. This aims to encourage investment in social housing, though it may also drive up housing benefits costs. Additionally, Right-to-Buy discounts will be reduced to retain more council homes within the public sector, with councils now able to reinvest 100% of sale receipts into new housing development.
Universal Credit Adjustments
For renters receiving Universal Credit, a small increase in working-age benefits (1.7% from April 2025) provides modest relief in meeting rental costs. However, with rental prices surging, there’s ongoing debate about whether this increase will significantly impact affordability.
A Path Forward for the Housing Market
While the Budget reflects a substantial investment in housing, the property sector had hoped for more direct support for first-time buyers, downsizers, and energy efficiency upgrades. Addressing housing affordability remains a priority, and the real test will be how these initiatives affect the property market in the coming years.
For sellers and buyers, understanding these changes is crucial as they plan property transactions in the evolving market. Our team is here to help you navigate these new policies and make informed decisions for your property journey.
