ASSESSING THE IMPACT OF LABOURS BUDGET ANNOUNCEMENT FOR THE PROPERTY MARKET IN AND AROUND POTTERS BAR

Thursday October 31, 2024

In a landmark budget announcement, Chancellor Rachel Reeves has introduced significant tax reforms with implications across the UK property market, including Hertfordshire. Auckland Estates evaluate how these changes might reshape the market for buyers, landlords, and investors in the area.

 

Stamp Duty Increase on Additional Properties

One of the most immediate changes concerns the Stamp Duty Land Tax (SDLT) on additional properties. Effective from October 31, 2024, the surcharge for second homes and buy-to-let investments has been raised from 3% to 5%. This increase adds considerable cost for landlords and investors: a second property valued at £500,000 will now incur £37,500 in SDLT, compared to £27,500 under previous rates​.

This adjustment could reduce investor activity, particularly in Hertfordshire’s high-demand areas, while potentially giving first-time buyers more room in the market. However, Labour’s decision to decrease the SDLT exemption threshold for first-time buyers from £425,000 to £300,000 by April 2025 may counteract these benefits by raising the tax burden on new buyers in areas with higher property prices like Potters Bar​.

 

Capital Gains Tax: Rates Maintained for Now

Contrary to expectations, Labour opted to retain the current capital gains tax (CGT) rates for property sales, holding at 18% for basic rate taxpayers and 28% for higher rate taxpayers. However, future reform is on the table, with potential increases or adjustments to CGT allowances. Auckland Estates foresees that any rise in CGT could impact investor strategies, particularly among those looking to liquidate properties.​

 

Income Tax and Threshold Adjustments

While Labour refrained from direct income tax hikes, the budget confirms the end of the income tax threshold freeze by 2025. From the 2028-29 tax year, thresholds will once again adjust with inflation, which may reduce tax burdens over time. Until then, the freeze subtly increases effective tax rates for those with rising wages, impacting affordability for buyers aiming to enter the market. Labour has also announced a 1.2% rise in employer National Insurance contributions starting in 2025, which may indirectly affect disposable income and home-buying power​

 

Housing Investments and Broader Financial Measures

Labour’s commitment to over £5 billion in housing investments aims to address supply shortages, expediting planning processes and boosting funding for local authorities. This could benefit the Hertfordshire property market by expanding the stock of new homes and easing housing demand in high-demand areas. We anticipate that a more streamlined planning system could aid developers in projects around Potters Bar, increasing housing options for prospective buyers​

Labour has also left inheritance tax (IHT) thresholds unchanged, with the £325,000 threshold frozen until 2030. This may increasingly affect estates in the South East as property prices climb, bringing more estates under the IHT threshold. Additionally, Labour intends to review agricultural and business reliefs, potentially increasing the tax liabilities on high-value properties.

 

What’s Next for the Hertfordshire Property Market?

For buyers, landlords, and investors in Potters Bar, Labour’s Autumn Budget represents significant shifts in costs and incentives. The higher SDLT on additional properties may moderate investor competition, which could create new opportunities for first-time buyers. However, the upcoming reduction in the SDLT exemption threshold will increase costs for new buyers in high-value areas.

Auckland Estates stands ready to advise clients navigating these changes, from SDLT planning to CGT strategies, as Labour’s policies unfold. With informed guidance, buyers and investors can position themselves strategically in an evolving Potters Bar property market.