With Labour’s first Budget in over 14 years, Chancellor Rachel Reeves has outlined significant changes affecting the property sector, particularly in affordable housing, stamp duty, and capital gains tax. Here’s an overview of the key announcements impacting UK renters and homebuyers.

1. Stamp Duty Increases for Additional Properties

One of the most notable announcements is the increase in stamp duty on additional properties, including second homes, buy-to-let investments, and purchases by non-residents. Starting from October 31, 2024, the surcharge will rise from 3% to 5%. This change is intended to curb demand for second homes and reduce competition for first-time homebuyers. With second home buyers already facing double council tax, this increase is expected to bring more properties to the market as additional costs discourage investment in secondary properties.

2. Impact on First-Time Buyers

For first-time buyers, the stamp duty thresholds will revert to previous levels by the end of March 2025, reversing the temporary relief introduced in the September 2022 mini-Budget. This adjustment could lead to increased costs for first-time buyers, especially in high-priced areas like London and the South East. The current first-time buyer exemption applies only to homes up to £500,000. Those purchasing properties priced higher could face an additional £15,000 in stamp duty costs.

3. Capital Gains Tax Remains Steady for Residential Property

In a move welcomed by many property investors, capital gains tax (CGT) rates on residential properties remain unchanged at 18% and 24%. This means that profits made from the sale of additional properties will continue to be taxed at the same rate, providing stability for investors. However, CGT rates on other assets are increasing from 10% to 18% at the lower rate and 20% to 24% at the higher rate, potentially impacting those with broader investment portfolios.

4. Corporation Tax and Business Rates Relief for Commercial Properties

In the commercial sector, business rates relief will be provided, especially to retail, hospitality, and leisure properties, with a planned 40% discount on rates for 2025–2026. Moreover, the corporation tax rate will remain capped at 25%, providing predictability for commercial property owners and operators.

5. Affordable Housing Commitments

Labour has set an ambitious goal to build 1.5 million homes over the course of this Parliament. The Chancellor announced £5 billion in funding for housing initiatives next year, including a £500 million boost to the Affordable Homes Programme, which aims to deliver an additional 5,000 affordable homes. In addition, £3 billion will be allocated to support small and medium enterprises (SMEs) in the Build to Rent sector through housing guarantee schemes.

6. Freedom to Buy and Mortgage Support

The existing mortgage guarantee scheme, which helps first-time buyers secure 95% mortgages, is set to become permanent. This scheme, previously due to expire in 2025, will now provide long-term support for buyers struggling with large deposits, making it easier for them to enter the housing market.

7. Cladding Remediation Investment

The Budget also includes £1 billion to expedite the removal of dangerous cladding, addressing safety concerns in high-rise residential buildings. This funding will prioritise social housing remediation to ensure safer living conditions for tenants.

For further details on the 2024 Budget’s impact on the housing sector, please see the full article at Gov.UK