THE AUTUMN BUDGET 2024 – WHAT PROPERTY BUYERS AND SELLERS NEED TO KNOW

Tuesday September 17, 2024

As we await the Autumn Budget 2024, all eyes are on the potential changes that could affect the UK property market. For buyers and sellers alike, it’s essential to stay ahead of any adjustments that might impact property taxes, the cost of moving, or investment opportunities. With rising inflation, fluctuating interest rates, and the continued housing supply challenges, this year’s budget promises to be particularly significant.

At Auckland Estates, we’ve put together some key predictions for what property buyers and sellers can expect from this year’s Autumn Budget, covering everything from potential tweaks to Stamp Duty and Capital Gains Tax to government initiatives designed to increase housing supply.

1. Potential Changes to Stamp Duty

Stamp Duty Land Tax (SDLT) plays a major role in shaping the property market, influencing when and how people move. The changes made during the pandemic—most notably the temporary Stamp Duty holiday—saw a surge in homebuying activity, particularly at the higher end of the market. However, with the government’s need to boost revenue, we could see a shift back to pre-pandemic thresholds or even higher rates for certain buyers.

Higher Stamp Duty for Expensive Properties?

One of the possibilities is an increase in Stamp Duty for high-value properties, particularly in areas like London and the South East. This could slow down activity in the upper-end market, making it more expensive for those buying second homes or properties as investments.

First-Time Buyer Relief

However, there is also speculation that the Chancellor will continue to support first-time buyers. We could see the threshold at which they start paying Stamp Duty raised, which would make homeownership more affordable for younger buyers.

For sellers, particularly those aiming to sell to first-time buyers, this would likely increase demand for properties within the lower price brackets.

Higher Rates for Property Investors

For those investing in buy-to-let properties or second homes, the additional 3% Stamp Duty surcharge may be increased further. This would be in line with recent efforts to discourage speculative purchases and ensure more properties remain available for owner-occupiers. If you’re thinking of selling an investment property, these potential changes could impact the market, making it more attractive for you to act before any new policies come into effect.

2. Capital Gains Tax (CGT) on Property

Capital Gains Tax on second homes and investment properties has already seen changes in recent years, and further adjustments could be on the horizon. The current speculation is that the government may bring CGT rates closer to income tax rates, which would particularly affect higher-rate taxpayers.

Impact of Potential Increases

At present, CGT rates on property stand at 18% for basic-rate taxpayers and 28% for higher-rate taxpayers. If the government opts to increase these rates to align with income tax levels, we could see these figures rise to 40% or even 45% for those in the higher tax brackets.

For sellers, this means that if you’re considering selling an investment property, now may be the time to act before any potential increases come into force. Otherwise, waiting could mean facing much higher tax liabilities when selling in the future.

3. The Buy-to-Let Sector – Will Landlords Face More Taxes?

The buy-to-let market has been subject to significant changes in recent years, with the phasing out of mortgage interest relief and the introduction of stricter energy efficiency standards. As a result, many smaller landlords have exited the market, and further tax increases could continue this trend.

Higher Taxes on Rental Income

There are rumours that the government could further limit tax reliefs available to landlords. This might involve reducing the personal allowance for rental income or introducing additional surcharges for higher-rate taxpayers. If these changes materialise, it could make buy-to-let investments less appealing, which might affect demand in the market for smaller rental properties.

For sellers with rental properties, this could either prompt landlords to sell off their portfolios ahead of further tax hikes or, alternatively, limit the pool of buyers who are willing to invest in such properties.

Incentives for Eco-Friendly Improvements

On the flip side, landlords may see incentives for making their properties more energy-efficient. The government has been encouraging greener property development, so landlords who invest in eco-friendly improvements—such as better insulation, solar panels, or heat pumps—could benefit from tax breaks or grants. This might increase the appeal of rental properties with lower energy bills, so buyers may look more favourably on homes that have already had these improvements.

4. Increasing the Supply of Homes

The shortage of housing remains one of the UK’s most pressing problems, and the government has fallen short of its target to build 300,000 new homes annually. To address this, the Autumn Budget may include measures aimed at increasing housing supply, which would directly affect buyers and sellers.

Boosting Affordable Housing

We expect to see further investment in affordable housing projects, as the government tries to tackle the housing crisis. This could include more funding for local authorities to build or purchase affordable homes, which could stimulate demand for development land or properties ripe for renovation.

For sellers in areas where development is on the rise, this could mean an increase in demand, particularly if the area benefits from new infrastructure or planning permissions.

Green Building Incentives

For developers and homeowners looking to sell eco-friendly properties, there could be further incentives introduced to encourage green building practices. This might include reduced VAT on green building materials or lower corporation tax rates for developers committing to net-zero homes. Sellers with properties that boast energy efficiency features may find these homes increasingly in demand.

5. Council Tax Changes on the Horizon?

Council tax is another area where changes might be announced, particularly regarding properties that have seen significant increases in value since the last revaluation in 1991.

A New Revaluation of Properties

There are predictions that the government could look to revalue properties and align council tax bands more closely with today’s market. This could lead to higher council tax bills for those in areas where property prices have skyrocketed. For buyers and sellers, this is something to watch, as it could affect the attractiveness of certain areas.

Second Home Surcharges

Another potential change is the introduction of higher council tax rates for second homes or properties left vacant for long periods. This could discourage second-home ownership and encourage more properties to be put on the market, which might be good news for buyers looking in areas with high levels of second-home ownership.

6. Social Housing and Rent Control Measures

Lastly, with the ongoing cost-of-living crisis, we could see the government introduce measures to protect tenants and increase social housing.

Increased Funding for Social Housing

Expect to see a boost in funding for social housing, which could impact the market by providing more affordable options for those struggling to buy. For sellers, especially those in areas with a high demand for affordable housing, this could increase competition, particularly if new builds are brought into the area.

Rent Controls

There are also murmurs of potential rent controls in some areas, capping how much landlords can increase rents year-on-year. If these controls are introduced, it could affect rental yields for buy-to-let investors and make certain properties less attractive to potential landlords.

Prepare for Change

The Autumn Budget 2024 is set to bring significant changes to the UK property market. Whether you’re buying or selling, it’s crucial to stay informed and prepared for any new policies that could impact property taxes, housing supply, or investment opportunities.

At Auckland Estates, we’re here to guide you through these changes. Whether you’re looking to buy your first home, sell an investment property, or explore new opportunities in the evolving market, our expert team is on hand to help you navigate what’s ahead. Keep an eye on the upcoming announcements, and don’t hesitate to get in touch for advice on how these changes might affect your property decisions.