The Impact of the Autumn Budget on the Property Market

Now that the dust has settled on the Autumn Budget, let’s look at how it will impact the property market.

When the Chancellor unveiled her Budget a fortnight ago, she didn’t do things by halves.

Rachel Reeves went big on tax, spending and borrowing in a Budget that accounting firm PwC described as “a concoction of sweet and sour”.

While the Budget didn’t turn out to be as seismic for the property market as some had predicted, there were a few important changes.

Stamp Duty

Ironically, in an announcement-packed Budget, it was something that the Chancellor didn’t say that will prove to be the most consequential for many.

Ms Reeves made no mention of renewing the Stamp Duty concessions introduced by the Tories in 2022.

Under these temporary measures, home-movers in England only pay Stamp Duty on properties worth over £250,000. For first-time buyers (FTBs), the threshold is £425,000.

Given the Chancellor’s radio silence, these concessions will expire in April. At that point, thresholds will revert to £125,000 for home-movers and £300,000 for FTBs.

The change could cost movers thousands of pounds, depending on the value of the property they purchase. While this is unlikely to be enough to deter movers altogether, it’s a good reason to get a deal over the line before April.

(It’s time to get your skates on if you’re considering moving.)

Rightmove’s Tim Bannister predicts a flurry of activity in the market over the next few months as people race to beat the Stamp Duty deadline. (The Bank of England’s decision last week to drop the base rate by 0.25% to 4.75% will probably energise buyers too.)

“We may now see a rush of buyers, particularly those purchasing for the first time, either bringing their plans forward or trying to get their deal done before charges go up,” he said.

“Those who are hoping to avoid higher charges will need to act quickly.”

In the longer term, the change will mean that after April more FTBs – according to Zoopla an additional 20% – will be liable to pay Stamp Duty.

Stamp Duty on second homes

Landlords are one group who won’t be able to outrun Stamp Duty hikes.

The Chancellor announced an immediate increase in the Stamp Duty surcharge on rental and holiday homes in England to 5% (a hike of 2%).

As a result, over the past two weeks, some landlords who had put offers in on properties have sought to renegotiate on price.

“In the short term, some landlords may need to pause for thought,” Mr Bannister said.

“But in the longer term, we expect it becomes another charge that landlords become accustomed to considering.”

Capital Gains Tax (CGT)

All the dire warnings that landlords would be clobbered with CGT rises, triggering a wave of sell-offs, turned out to be hot air.

There was no change to the rate of CGT paid on the profits from the sale of second properties. CGT remains at 18% for basic rate taxpayers and 24% for higher rate taxpayers.

However, there was a hike in CGT on profits from the sale of shares and other non-residential assets. There is now parity between CGT on second properties and non-residential assets. (Note: This tax does not apply to your primary residence.)

Inheritance Tax (IHT)

IHT was another area subject to lots of speculation, much of which proved to be untrue.

But the Chancellor did freeze the £325,000 IHT threshold for a further two years.

Currently, only about 4% of estates pay IHT due to exemptions for spouses and civil partners.

However, freezing thresholds will mean that over time, more estates will attract IHT – something worth thinking about when planning for the future.

Other changes to IHT relating to farm/agricultural businesses and pensions were announced.

VAT on private school fees

As expected, VAT will be applied to private school fees.

Views are mixed on what the ramifications of this measure will be. Some say the added costs will force families out of the private sector – and intensify competition for places at good state schools.

We’ll be closely monitoring the situation, but as a hard and fast rule, if your property is close to a top-notch school, you should factor this into your pricing and marketing strategies.

Why experience really matters in the property sector

With FTBs scrambling to get on the ladder quickly, and BTL investors hoping for leeway on asking prices, now is not the time for novices.

This is why sellers need an experienced agent with good negotiating skills working for them.

Over the years, we’ve worked through upswings, downturns and a host of regulatory and tax changes.

We can help you take the next step in your property journey.

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