The October Budget 2024 - How Will It Affect The Property Market?

Let’s take a look at how the most recent budget might impact the property industry.?

This is Labour’s first budget in some 14 years, and they have managed to increase taxes by a further ￡40 billion, increasing borrowing to ￡127 billion for this tax year!

Capital Gains Tax (CGT)

CGT has increased from 18% to 24% (a massive 6%) on profits made from the sale of assets (including second homes). Residential property sales remain at 18% and 24%. For people earning ‘under’ ￡50,270 per annum (10%-18%) and for anyone earning ‘over’ ￡50,270 (20%-24%).

Inheritance Tax Rules

For the time being, the inheritance tax rules have remained unchanged, and it has been confirmed this will not change until 2030 (it has not moved since 2009 - but if the amount had increased alongside inflation the total amount would now be at ￡503,879).

At the current time, the first ￡325,000 of a property’s sale profit can be inherited ‘tax-free’ and if you are a ‘direct receiver’ such as a child or grandchild, the amount for ‘tax-free’ inheritance increases to the first ￡500,000. If you are leaving property to a spouse and it is then inherited by direct descendants again such as a child the allowable amount further increases to ￡1 million.

IHT is a UK tax, so these changes apply in Scotland.?

Pledged ￡500 Million

Government has advised that ￡500 million will be invested into ‘affordable housing’. Stating that the money will be used to boost small housebuilder businesses and deliver over 30,000 new affordable homes.

Government are also stating that ￡1 billion will be used to remove dangerous cladding from high rise apartment blocks during 2025, but given they have had 7 years already to deal with this issue and have not released any details on how they are going to actually solve this ongoing problem (or directly help the homeowners who are still trapped and unable to obtain mortgages due to continuing lender restrictions) we will wait with baited breath as to the actual outcome.

Mortgage Rates

It is anticipated that mortgage rates will now rise and a detailed analysis by the ‘Office for Budget Responsibility’ advised that it now expects mortgage rates to start increasing.

The Bank of England has documented evidence that around two-thirds of ‘fixed rate’ mortgages that were entered into prior to 2022 (when the rates started to increase) have now been refinanced. Mortgage rates are about 0.3% higher on average than they initially forecasted.

Stamp Duty (England & Northern Ireland only)

The surcharge of owning a second property has been increased from 3% up to 5% and is effective already. This is more than double, this is a very big change and quite a commanding move from the government. This will have a lot of impact on people who are stuck in a chain of still selling your old home, whilst you have moved into your new home and landlords of course, will be impacted severely again.

This will only fuel the current problem of high rent demand and low stock of rental properties, which makes it seem like the government is continuing to try and push landlords out of the property market. Government is suggesting that this will be lowered again after April 2024. But in the meantime, the only result this will produce is a further increase in rents throughout England and Northern Ireland.

LBTT (Scotland’s - Land and Buildings Transaction Tax) no changes were made.

New Rates - Stamp Duty:

Purchase price: Up to ￡250K

Stamp Duty remains at ￡0

Purchase Price: ￡675K to ￡925K (portion from ￡250,001-￡925,000)

Stamp Duty increased to 5%

Purchase Price: ￡575K (portion from ￡925,001-￡1.5 million)

Stamp Duty increased to 10%

Anything above ￡1.5 million would be facing 17%.

National Insurance for Employers

The increase in National Insurance will have an impact on housing/construction employers, and could end up costing them up to a further ￡865 per employee per year. Meaning they might have to make redundancies, etc.

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www.murraypropertyholdings.co.uk