In recent months there has been a more optimistic feel to the property market. A combination of lower inflation and cheaper mortgage rates has resulted in renewed activity levels for buyers and sellers, with house prices rising by 0.7% in September. According to Nationwide, annual house price growth is now 3.2% - the strongest annual increase since November 2022.
Written by Lisa Proffitt | 30th October 2024
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How will the Autumn Budget affect the housing market?
In the Autumn Budget it was revealed that stamp duty tax will rise next year as expected and capital gains tax will remain at its current rates for residential homes - see details below - but the Chancellor’s speech contained a series of other property announcements that will have an impact on the UK housing market.
Stamp duty land tax to increase
On stamp duty, The Chancellor led with the announcement that the surcharge on purchases of second homes and buy-to-let properties is to increase from 3% to 5% from 31st October 2024.
There was no mention of freezing stamp duty thresholds in the Budget which means thresholds will increase for homebuyers from the end of March 2025 as planned.
Property tax breaks have been in place since the mini-Budget of September 2022, but they now will revert to their old rates in spring.
Homebuyers in the most expensive areas of England - in particular London and the South East -will be most impacted by increases to thresholds due to high average property prices. There will no longer be first-time buyer relief on properties priced up to £625,000 – the total property price must be no more than £500,000 for any first-time buyer savings on stamp duty to apply.
Stamp duty thresholds from the end of March 2025
Price of property Stamp duty (from 1 April 2025)
Up to £125,000 Zero
The portion from £125,001 to £250,000 2%
The portion from £250,001 to £925,000 5%
The portion from £925,001 to £1.5 million 10%
Anything above £1.5 million 12%
First-time buyers will be exempt from stamp duty up to £300,000 as long as the total property price is no more than £500,000.
Stamp duty surcharge increase for foreign buyers
In a move intended to prioritise British house buyers, the stamp duty surcharge for foreign buyers has increased. Non-UK residents will now pay a 3% surcharge on top of normal stamp duty rates, an increase of 1%.
Capital gains tax for residential property remains the same
Capital gains tax for residential homes is to be held at the current rates of 18% and 24%. On other assets, the lower rate of capital gains tax is to be increased from 10% to 18%, and the higher rate from 20% to 24%.
Capital gains tax (CGT) is payable on profit made by the value increase of an asset, such as a property, after its sale. The tax payable is not based on the amount of money you receive for the asset but the gain you make. You pay on profit made when you sell property that’s not your main home, for example a buy-to-let property, land, or inherited property. Although there are some exceptions, for example main homes with grounds of over an acre, most owner-occupied homes qualify for private residence relief and are therefore exempt from any capital gains tax.
Inheritance Tax
The freeze on the inheritance tax threshold is extended for a further two years to 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax-free allowance is passed to a surviving spouse or civil partner. The Chancellor added that she will bring inherited pension pots into inheritance tax from April 2027.
Affordable housing
The Chancellor reiterated Labour’s manifesto promise to build 1.5 million homes over the course of this Parliament. £5 billion of investment has been committed to deliver plans on housing next year, including £3.1 billion for affordable homes and £3 billion support in the form of housing guarantee schemes.
Right to Buy scheme reforms
The Chancellor has announced a reduction in the Right to Buy discount offered to tenants purchasing their council house. Reeves confirmed the reduction of Right to Buy discounts and that local authorities will be able to retain 100% of the receipt of these sales - they had previously had to return a percentage to the Treasury - enabling councils to scale-up delivery of social housing while still enabling longstanding tenants to buy their own homes.
If you would like to talk to one of our property experts about your moving plans, and how you might be impacted by the changes above, please contact your local office and we’ll be happy to help.