Britain’s first female Chancellor of the Exchequer, Rachel Reeves, announced a staggering £40 billion tax increase in her Autumn Budget. 

The Labour Government’s first Budget since 2010 prioritised the NHS and schools, making them the largest beneficiaries of increased spending. Meanwhile, businesses seem to bear the brunt, with employer National Insurance contributions set to rise by 1.2%—up from 13.8% to 15%. Some employers may ultimately pass these added costs onto employees by limiting pay rises or slowing recruitment.

Despite criticism from the Opposition, Reeves stayed firm on her manifesto promise not to raise income tax, NI, or VAT for working individuals. Still, alongside this additional NI payment from next April, traditional estate agencies will need to prepare for a 6.7% increase in the minimum wage, which will rise to £12.21 per hour. This may discourage some business owners from hiring additional staff, as wage bills climb.

One positive aspect for businesses and individuals alike is that the Chancellor decided to freeze fuel duty, meaning drivers will see no increase in prices at the pumps for the time being.

What’s the Outlook for the Sales Market?

Despite calls for a new Help to Buy scheme, Reeves refrained from introducing additional support for first-time buyers, which could have energised the already-recovering market. However, the Chancellor’s decision to stick with the previous government’s plan gives a short-term opportunity: first-time buyers in England and Northern Ireland will continue to enjoy temporary stamp duty relief until March 2025 on properties priced up to £425,000. After this, the stamp duty threshold will revert to homes priced above £300,000—giving prospective buyers five months to find a property and avoid the duty.

While a reform of stamp duty rules could have spurred more downsizers to enter the market, this was not on the agenda. Even so, the market looks optimistic through 2024 and into 2025: interest rates are falling, further cuts are expected, mortgage approvals are at a peak since 2022, and prices are beginning to rise once more.

What Does This Mean for the Lettings Market?

The anticipated rise in Capital Gains Tax (CGT) was avoided, much to the relief of landlords. However, they will see an increased stamp duty rate on second homes, up from 3% to 5% as of 31st October. Landlords mid-purchase may find themselves unexpectedly impacted, and this change might discourage further investment in the private rented sector.

However, with CGT increases on other non-property assets, some investors may be tempted to shift their focus towards residential property. Those hoping for a review of Section 24 of the Finance Act 2015, which removed landlords’ ability to deduct mortgage interest payments from their rental income, were disappointed once again as no changes were announced. Furthermore, housing benefit rates for the most vulnerable tenants will remain frozen.

Other Property-Related Announcements

In addition to the stamp duty changes, the Chancellor announced adjustments to inheritance tax, with the first £325,000 of an estate now tax-free—rising to £500,000 if the estate includes a home passed on to direct descendants, and up to £1 million when allowances are transferred to a spouse or civil partner. Reeves has also committed £5 billion to the Government’s housing initiatives and £3.1 billion to the Affordable Homes Programme. Additionally, Right to Buy discounts will be reduced, allowing councils to reinvest more capital into social housing.

Key Budget Takeaways:

• Employer NI Increase: Rising from 13.8% to 15%, with some exemptions for small businesses.
• Minimum Wage Increase: A rise to £12.21 per hour may impact staffing in some sectors.
• CGT Increases on Non-Property Assets: May drive more investment into residential property.
• Stamp Duty Surcharge: Second homes now incur a 5% surcharge.
• Inheritance Tax Threshold Freeze: Continues, with allowances structured for descendants.

Conclusion

Whether you’re thinking of buying, selling, or renting, with the right support from I Am The Agent, you can make informed choices that benefit you. We’re here to guide you on your property journey and help you reach your goals with confidence.

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