Here is how the Labour Budget will affect residential property

Chancellor of the Exchequer Rachel Reeves has announced her plans on spending and taxation. There were several policies affecting residential property starting with an increase in the stamp duty land tax for second/additional homes from two per cent to five per cent, applicable from tomorrow, Thursday October 31.

First-time buyers, who pay no stamp duty on homes priced up to £425,000, will see that benefit end in March 2025. This will be a blow for those already struggling to save to get on the property ladder.

Capital gains tax is set to increase with the tax charged on profits from selling non-residential assets set to rise from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent. However, the rates on residential property will remain at 18 per cent and 24 per cent.

Hide Ad
Hide Ad

The chancellor is extending the inheritance tax threshold freeze for a further two years to 2030 so the first £325,000 of any estate can be inherited tax-free and if an estate is passed to direct descendants, the non-taxable amount will be £500,000 and there is a £1m threshold when a tax free allowance is passed to a surviving spouse or civil partner.

LONDON, ENGLAND - OCTOBER 30: Chancellor Rachel Reeves poses with the red box outside number 11 Downing Street on October 30, 2024 in London, England. This is the first Budget presented by the new Labour government and Chancellor of the Exchequer, Rachel Reeves. (Photo by Dan Kitwood/Getty Images)placeholder image
LONDON, ENGLAND - OCTOBER 30: Chancellor Rachel Reeves poses with the red box outside number 11 Downing Street on October 30, 2024 in London, England. This is the first Budget presented by the new Labour government and Chancellor of the Exchequer, Rachel Reeves. (Photo by Dan Kitwood/Getty Images)

From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50 per cent relief, at an effective rate of 20 per cent.

The good news for those caught in the Building Safety Scandal is that there will be £1bn to speed up the removal of dangerous cladding on homes. However, this does not appear to tackle other building safety issues that leasehold apartment owners are saddled with.

Boosting the supply of affordable homes was an election promise and so the supply of affordable housing will increase, while Right to Buy discounts will fall and income from the sale of social housing will be reinvested in existing stock.

Hide Ad
Hide Ad

There is good news for small housebuilders as the Chancellor promised to provide £3bn of support to boost the supply of homes while supporting small homebuilding businesses that have struggled against the brute force of large house building firms.

Mark Manning, MD of Manning Stainton estate agents, says: “It’s been a fairly negative budget for the housing market today, particularly for the lettings sector. The decision not to increase Capital Gains Tax on the sale of residential properties is a relief for landlords as there’s been so much speculation that it would rise.

“However, the increase in the stamp duty surcharge on second homes is not good news and will have a negative impact on the sector. The increased costs it will create will deter people from becoming landlords and stop many existing landlords buying further properties to let out. This will lead to an even worse shortage of rental properties, which will push up rents. Not good news for people who rent.

“I’m also disappointed to see that the Government made no mention of extending the current stamp duty threshold rates today, which signifies that they will revert back to the previous, much less generous rates next April. This will make it harder than ever for first time buyers to enter the housing market as many starter homes now cost over £300,000.

Hide Ad
Hide Ad

“It will slow the rest of the market down too as people decide to stay put to avoid paying high stamp duty fees, including older people who want to downsize. It’s a real blow for the market and will impact almost all buyers.

“On a more positive note, there seemed to be some genuine commitments to reforming the planning process, which should make the process of building new homes quicker and easier. This will be particularly welcome news for smaller developers, who have struggled over the last few years as funding and construction costs have increased.

"However, more detail is needed around proposed planning reforms before developers can begin to feel more confident.”

Tim Bannister , Rightmove's property expert said: “Increasing stamp duty on additional home purchases by two per cent means that, based on the average asking price for a home, £371,958, a landlord could face an additional charge of more than £7,000 from tomorrow when buying a property. In the short-term, some landlords may need to pause for thought, but in the longer-term it becomes yet another charge that landlords wanting to invest in buy-to-let will have to become accustomed to and factor into their decision making. Overall, we need more homes in the rented sector not fewer, but in recent times we have seen record levels of stock leaving the rental market.

Hide Ad
Hide Ad

"There was no mention of retaining the current residential property thresholds for paying stamp duty, which means we expect that the typical first-time buyer will be over £3,500 worse off come April 1 based on current prices. After paying fees, carrying out any surveys, and stretching their budget with high mortgage rates, this will be an unwelcome additional charge next Spring.

"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. It currently takes a lengthy 152 days on average to complete a property transaction once a sale is agreed, which would mean agreeing a deal tomorrow to complete on time. While this is an average and many will be hoping to complete more quickly, it highlights that those who are hoping to avoid higher charges will need to act quickly.

"It’s still early days for the government and it’s encouraging to hear its wider commitments to housebuilding, but we are hoping for more support for first-time buyers and making the existing thresholds permanent would have been a start.”

Comment Guidelines

National World encourages reader discussion on our stories. User feedback, insights and back-and-forth exchanges add a rich layer of context to reporting. Please review our Community Guidelines before commenting.

News you can trust since 1754
Follow us
©National World Publishing Ltd. All rights reserved.Cookie SettingsTerms and ConditionsPrivacy notice