How will the Autumn Budget 2024 affect sellers, landlords, and homeowners?

As the Autumn Budget 2024 approaches, homeowners, landlords and property investors are bracing for potential changes that could significantly impact the housing market.

With a new Labour government facing the challenge of addressing a supposed £22 billion financial shortfall, tax changes are on the horizon, many of which are expected to directly affect those in the property sector.

From potential increases in Capital Gains Tax and Inheritance Tax to reforms in Stamp Duty and Property Tax regulations, the Budget could reshape the landscape for many homeowners. At the same time, energy efficiency grants, regeneration initiatives and lower interest rates may offer opportunities for landlords and buyers alike.

In this article, we’ll cover how these expected changes could affect sellers, landlords and homeowners, and why now might be the perfect time to consider selling to avoid future uncertainties.

What are the expected property tax changes in the Autumn Budget 2024?

With the new Labour government under pressure to address the £22bn gap in public finances, property taxes are a key target for revenue generation. While major tax hikes in income tax, National Insurance, and VAT have been ruled out, speculation is growing around potential changes to other forms of taxation, particularly those impacting property owners.

Key property tax changes could include:

• Council Tax: There have been no significant updates to council tax bands since 1991, and with property values having surged over the past three decades, there is speculation that a revaluation could be announced. Such a move would likely increase tax bills for many homeowners, especially in high-value areas.

• Business Rates: The Labour government has expressed an interest in overhauling the business rates system, which may be replaced by a more locally driven tax structure. This could have implications for property investors and commercial landlords, as tax burdens might shift depending on regional policies.

• Overseas Buyers: The Labour Party manifesto committed to increasing the Stamp Duty Land Tax surcharge for overseas buyers purchasing UK residential property by an additional 1%. This measure is designed to curb foreign investment in the housing market and prioritise UK-based buyers, especially for new-build properties.

These potential changes are being introduced in the context of the government’s stated focus on economic growth, which means that while tax increases are expected, measures to support investment and regeneration are also likely to be featured.

Will Capital Gains Tax changes impact landlords and sellers in 2024?

One of the most significant expected changes in the Autumn Budget is to Capital Gains Tax, especially for property owners and landlords. The government has signalled that Capital Gains Tax rates could increase to help raise much-needed revenue.

Currently, Capital Gains Tax is charged on profits from selling assets, including second homes and rental properties, with rates at:

• 18% for basic rate taxpayers

• 24% for higher and additional rate taxpayers (recently reduced from 28%)

Rumours suggest that these rates could increase, possibly bringing Capital Gains Tax in line with income tax rates, meaning:

• 20% for basic rate taxpayers (a 2% increase)

• 40% for higher rate taxpayers (a significant 16% increase)

• 45% for additional rate taxpayers (a 21% increase)

If these changes are announced, landlords and sellers could face much higher tax bills when disposing of property, particularly if they are selling second homes or buy-to-let properties. This may incentivize a rush to sell properties before any new rates come into effect, potentially distorting the housing market in the short term.

There’s also speculation about tapering for longer-held assets, which could offer some relief to those who’ve held onto properties for several years. Short-term property investors, however, could face significantly steeper Capital Gains Tax rates under the new rules.

How will the Inheritance Tax changes affect property owners and landlords?

Inheritance Tax is another area where significant changes are expected, with potential implications for property owners, especially those with substantial assets. Currently, Inheritance Tax is charged at 40% on the portion of an estate that exceeds the £325,000 threshold (or £650,000 for couples).

There are rumours that the Residence Nil Rate Band (RNRB), which allows homeowners to pass on an additional £175,000 (for their main residence) tax-free to their children or grandchildren, may be reformed or scrapped entirely. This could reduce the amount of inheritance that can be passed down without facing tax, especially in the context of rising property prices.

Possible changes include:

• Increasing Inheritance Tax rates beyond 40% for larger estates, potentially introducing progressive tax bands where the rate rises with the estate’s value. For example, estates over £2 million might face a higher rate.

• Reducing exemptions like the RNRB, making it harder for families to avoid paying Inheritance Tax on inherited properties.

• Capital Gains Tax on death: Another major proposal under consideration is the introduction of Capital Gains Tax on inherited properties, in addition to Inheritance Tax. This means that when properties are passed on after death, they could be subject to both Capital Gains Tax (on the gain in value) and Inheritance Tax, significantly increasing the tax burden for beneficiaries.

For property owners, especially those with large portfolios, these changes could lead to more complex estate planning. Landlords may be particularly affected as they often have significant property assets that they intend to pass down to heirs.

What are the new Stamp Duty rules in the Autumn Statement 2024?

Stamp Duty Land Tax could see revisions in the Autumn Budget, particularly affecting property investors and overseas buyers.

Currently, landlords and property investors pay an additional 3% Stamp Duty surcharge on top of standard rates when purchasing buy-to-let properties or second homes. Although there haven’t been major rumours about increasing this surcharge, industry bodies such as the National Residential Landlords Association (NRLA) have called for its removal, arguing that it stifles investment in the private rental sector.

Labour has also pledged to introduce higher Stamp Duty rates for overseas buyers purchasing residential property in the UK. The proposal includes an additional 1% surcharge, making it more expensive for foreign investors to buy property in the UK. This move is designed to curb foreign speculation in the UK housing market and prioritise domestic buyers, especially in high-demand areas like London.

While no specific reforms to standard Stamp Duty rates have been widely discussed, housing market organisations like the HomeOwners Alliance have lobbied for a reduction in Stamp Duty across the board, arguing that it serves as a major barrier to homeownership. However, with the government’s focus on raising revenue, a reduction seems unlikely in the immediate future.

Property investors and landlords will need to consider these potential changes carefully, as Stamp Duty reforms could significantly impact the costs of expanding portfolios or buying investment properties.

How will the October Budget 2024 address housing supply and regeneration?

Housing supply has long been a critical issue in the UK, and the Autumn Budget 2024 is expected to address this through new policies aimed at boosting housing development and regeneration. The Labour government has emphasised that tackling the housing crisis is central to their growth strategy, which could see reforms to the planning system and increased funding for regeneration projects.

Key areas to watch for in the Budget include:

• Reformed planning rules: One of the main obstacles to increasing housing supply is the slow and cumbersome planning process. Labour has signalled plans to streamline the system, making it easier and quicker for developers to get planning permission, particularly for large-scale residential projects. This could result in faster housing development, especially in areas identified for regeneration.

• Support for brownfield development: The government may also introduce or expand incentives for brownfield site development, encouraging developers to build on previously used land rather than focusing on greenfield sites. These incentives could include grants, tax reliefs, or subsidies to support the regeneration of urban areas, helping to revitalise cities and increase housing availability.

• Affordable housing initiatives: It’s likely that the Autumn Budget will include measures aimed at increasing the supply of affordable housing. This could involve expanding funding for social housing projects or introducing new incentives for private developers to include affordable units in their developments.

• Build-to-rent incentives: To address the demand for rental properties, the government may announce incentives for build-to-rent projects, encouraging developers to create long-term, purpose-built rental accommodations. This could help ease pressure on the rental market, particularly in urban centres where demand is high.

• Green regeneration projects: In line with the government’s focus on climate change, we may see the introduction of green regeneration funding, targeting sustainable housing developments. This could include incentives for building energy-efficient homes, utilising green technologies, or integrating sustainable urban planning practices.

These initiatives aim to address both the housing supply crisis and the regeneration of underdeveloped or declining areas, supporting both economic growth and the creation of much-needed homes.

Will energy efficiency grants and new regulations benefit landlords?

The Labour government’s commitment to tackling climate change and improving energy efficiency is likely to feature prominently in the Autumn Budget 2024, with significant implications for landlords. The government has already outlined plans for stricter Energy Performance Certificate (EPC) requirements, which will push landlords to upgrade the energy efficiency of their properties.

Key developments expected in the Budget include:

• Energy efficiency grants: Landlords could benefit from the introduction of new energy efficiency grants, which are likely to be expanded as part of the government’s Warm Homes Plan. These grants would help fund energy-efficient upgrades to rental properties, such as insulation, double glazing, and energy-efficient heating systems, allowing landlords to comply with future regulations at a reduced cost.

• Minimum EPC rating requirements: From 2030, all rental properties will need to meet a minimum EPC rating of C. The Budget may include further details on financial assistance to help landlords meet this target, such as low-interest loans or grants for necessary improvements. This will help landlords avoid penalties and keep properties rentable under the new regulations.

• Green heating technologies: The government may introduce specific incentives or grants for installing clean heating technologies, such as heat pumps and solar panels. This could reduce the upfront cost for landlords looking to upgrade their properties, while also future-proofing them against upcoming regulations on carbon emissions.

• Tax relief on energy efficiency improvements: To further encourage landlords to make their properties more energy-efficient, the government could introduce tax relief on energy-related upgrades, allowing landlords to deduct the cost of improvements from their tax liabilities.

While these measures will require landlords to invest in property upgrades, the availability of grants and tax reliefs will help reduce the financial burden, making it more attractive for landlords to meet the new regulatory requirements while enhancing their property value.

How will pension tax relief changes affect property investors?

Changes to pension tax relief are expected in the Autumn Budget 2024, with potential implications for property investors who utilise their pensions as part of their overall investment strategy. The Labour government has indicated that pension tax relief, which currently costs the government around £50bn annually, is a target for reform, and several options are being considered.

Key potential changes include:

• A flat rate of pension tax relief: The current system provides tax relief at an individual’s income tax rate, with basic rate taxpayers receiving 20% relief and higher and additional rate taxpayers receiving 40% and 45% relief, respectively. The government may introduce a flat rate of pension tax relief, likely around 30%, which would benefit basic rate taxpayers but reduce the relief available to higher earners, including many property investors who fall into higher tax brackets.

• Impact on retirement planning for property investors: For property investors who rely on Self-Invested Personal Pensions (SIPPs) or other pension schemes to fund property purchases, these changes could reduce the tax efficiency of their investment strategy. A lower rate of pension tax relief could make it less attractive for higher earners to invest pension funds into property, as the tax advantages would be diminished.

• Reintroduction of the Lifetime Allowance: The Lifetime Allowance (which caps the total amount of pension savings that can benefit from tax relief) was abolished in 2024 under the previous government. However, Labour could reinstate this cap, potentially limiting the amount of tax-free pension contributions for high earners, including those using pension funds for property investment. This could further restrict the ability of property investors to leverage pension savings for property acquisitions.

These changes may lead property investors to reassess their pension strategies and consider alternative ways to fund property investments, particularly if pension tax relief becomes less advantageous.

Will landlords see relief from lower interest rates in 2024?

Landlords are set to benefit from lower interest rates in 2024, as the UK economy sees a reduction in borrowing costs. After a period of elevated rates designed to curb inflation, the Bank of England is expected to lower the base rate to around 4.75% in November 2024, with further cuts projected to bring it down to 3.75% by the end of 2025.

This reduction in interest rates could provide relief for landlords in several ways:

• Lower mortgage repayments: Many landlords who are on variable-rate or tracker mortgages will see their monthly mortgage payments decrease as interest rates fall. This will improve cash flow, making property ownership more affordable and potentially increasing the profitability of buy-to-let investments.

• Increased refinancing opportunities: With lower rates, landlords may also look to refinance their existing mortgages, locking in better deals on fixed-rate mortgages. This could provide long-term cost savings and help landlords secure more favourable terms on their property loans.

• New property purchases: Lower interest rates may also encourage landlords to consider expanding their portfolios. Cheaper borrowing costs could make new property purchases more financially viable, especially in areas where rental demand is high. This could stimulate further investment in the rental market.

• Impact on rental yields: While lower interest rates reduce financing costs for landlords, they may also lead to increased competition in the property market as more buyers are encouraged to enter. This could push up property prices, potentially squeezing rental yields for investors. However, for landlords with existing properties, the reduced cost of borrowing will generally outweigh any negative impacts on yields.

Overall, lower interest rates will be a positive development for landlords, offering opportunities for both cost savings and portfolio growth.

Are there any new incentives for property buyers in the Autumn Budget 2024?

In line with Labour’s focus on affordable housing and promoting homeownership, the October Budget 2024 is expected to introduce several new incentives for property buyers, particularly aimed at first-time buyers and those looking to get onto the property ladder.

Potential new incentives include:

• First-time buyer reliefs: The government may extend or enhance Stamp Duty Land Tax relief for first-time buyers. This could involve raising the threshold at which first-time buyers start to pay Stamp Duty or offering additional reliefs for those purchasing homes in areas targeted for regeneration or new housing developments.

• Shared ownership schemes: To make homeownership more accessible, the Budget could include new or expanded shared ownership schemes. These programs allow buyers to purchase a share of a property (often between 25% and 75%) and pay rent on the remainder, with the option to increase their ownership stake over time.

• Help to Buy replacement: With the Help to Buy scheme no longer available, the government may introduce a replacement program aimed at supporting buyers with small deposits. This could involve government-backed mortgage guarantees or low-interest loans to help cover deposit costs for first-time buyers.

• Green homebuyer incentives: In line with the focus on energy efficiency, the Budget could also introduce green incentives for homebuyers. This might include grants or tax reliefs for buyers purchasing energy-efficient homes or properties with low carbon footprints, encouraging the purchase of eco-friendly housing.

These incentives are designed to make property ownership more achievable for first-time buyers, support the broader housing market, and stimulate economic growth by encouraging investment in housing.

Should you sell your house to a cash buyer in light of the Autumn Budget 2024?

With the upcoming Autumn Budget 2024, homeowners considering selling their property might find that selling to a cash buyer offers significant advantages particularly in an uncertain economic climate. 

With potential changes to Capital Gains Tax, property taxes, and broader market conditions, selling to a cash buyer can provide the certainty and speed that many sellers need. Here’s why it could be a smart move:

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