A Shock Stamp Duty Increase & More – Budget Roundup
Hello readers,
Today is the day we have all been nervously waiting for – the first Labour budget in 14 years. Dubbed a bombshell budget, stuffed full of tax rises (￡40bn to be precise), this budget outweighed those of Rishi Sunak in 2022, George Osbourne in 2010 and Gordon Brown in 2002.
This budget lays out ￡40 billion of tax rises, with a planned net increase in spending of by ￡19.6bn in 2024 and with an average of ￡32.3bn increased spending over the next five years.
The immediate market response has been mixed with the 10-year gilt yield price climbing to 4.39% today, a new five month high.This could signal an initially negative reaction by the world looking in, but I think we need to give it time for the dust to settle before reading too much into it.
I thought I’d pull together a quick summary of the key points that property investors will want to know.
Employers National Insurance
This was a contentious area and one with mixed proposals leading up to the budget. The rise here was greater than expected and, according to the FT, will raise ￡25bn of the ￡40bn total figure.
For small businesses, it looks like any change will be minimal (with some better off), however this will have a significant impact for larger businesses.
Here are the headlines, with changes taking effect from April 2025:
This may lead to a general increase in prices as businesses, especially larger ones, seek to pass on additional expenses onto the consumer.
Capital Gains Tax
As I suspected, Capital Gains Tax for property will remain unchanged, but elsewhere it will be brought in line with:
Stamp Duty on Second Homes
This was a surprise policy, with the additional stamp duty levy going up from 3% to 5% and taking effect from tomorrow! I don’t doubt that this afternoon will have been somewhat stressful for conveyancing solicitors, and for many people currently involved in a purchase or sale.
This policy could push up rents if less landlords are investing in new rental properties, reducing the rental supply available, and I think it is a mistake on the government’s front if they actually want to improve conditions for ‘working people’ that need to rent a property.
As investors, this additional cost will simply need to be accounted for when assessing deals. Investors looking to expand will need to seek out a lower price or simply look for a different type of property or better deals elsewhere.
History will tell the tale, but this could be an own goal if it dampens investor appetite, leading to a lack of rental properties and uncontrollable rent increases.
IHT Freeze Extended
There’s mixed news on inheritance tax, with no changes in respect of allowances, but it looks like the Government will soon be getting their hands on pension pots, with inherited pensions being subject to inheritance tax from April 2027.
This one will undoubtedly cause consideration of those with larger pension pots as to whether they should be putting funds elsewhere or have some other way of protecting them.
National Minimum Wage
Whilst not strictly linked to the property market, I could not miss off the 6.7% increase to the national minimum wage to ￡12.21 from April 2025.
This, coupled with increased employment costs will undoubtedly lead to price rises and potentially even an increase to inflation over the coming year.
So, what of an initial response? Looking at some articles I have found the graph below that highlights how the OBR have forecast that by 2028-29, the tax burden will be the highest it’s ever been.
Reporting in Sky News, Rishi Sunak has put forward a very strong response to the changes and you can watch the one minute clip by clicking below.
As you will see, it’s a mixed bag and whilst the dust settles I’d be keen to hear how you will be affected and whether any of this will cause you to change up your investment strategy. The best way to get in touch is to send me an email at [email protected]
Hasan