Last week’s Autumn Budget marked Labour’s return to budget delivery after more than 14 years. Chancellor Rachel Reeves introduced what is considered one of the most significant budgets in five decades, featuring record tax hikes, large-scale borrowing and substantial provisions for public services, with the increase in government spending aiming to address a £22 billion budget ‘blackhole’ inherited from the previous administration and “fix the NHS and rebuild Britain.” Much of this increase will be funded by a hike in employer National Insurance contributions, tighter tax avoidance measures and increased taxes on higher-income individuals, including non-doms and those with significant capital gains.
For property professionals, the Budget introduces changes across stamp duty, corporation tax, inheritance tax, planning, housebuilding and support for build-to-rent projects. Here are the key takeaways for those in the property sector.
Capital gains tax unchanged on residential properties
Despite speculation to the contrary, capital gains tax (CGT) on residential property sales remained untouched, which offers some stability for landlords managing their portfolios.
Nick Leeming, chairman of Jackson-Stops, welcomed the decision: “We welcome the Chancellor’s decision to leave CGT on residential property and buy-to-let properties unchanged,” noting that a CGT increase could have tightened the rental market further by discouraging investment.
For assets other than residential properties, the Chancellor confirmed an increase in CGT for basic-rate taxpayers from 10 to 18 per cent and from 20 to 24 per cent for higher-rate taxpayers.
Stamp duty increases
The government unexpectedly raised the higher rate of stamp duty land tax (SDLT) for additional dwellings from 3 per cent to 5 per cent. Effective the next day (i.e. from 31 October 2024), this change impacts second homes, buy-to-let properties and residential purchases by companies. The rapid implementation of the new rate has left landlords with little time to plan for additional costs, which may lead to some transactions falling through. However, landlords who exchanged contracts before 31 October are exempt from the increase, provided their contracts were unconditional and remain unamended.
Lucian Cook, head of residential research at Savills, commented: “Any relief buy-to-let landlords and second homeowners may have felt from seeing their exposure to capital gains tax unchanged will have been very short-lived given an increase in the SDLT surcharge.”
Corporation tax capped
For property investors using a limited company structure, corporation tax will remain capped at 25 per cent for the duration of this parliament. Currently, companies with profits up to £50,000 are taxed at 19 per cent, rising incrementally to 25 per cent for profits exceeding £250,000. The government data suggests that nine in ten active companies will have a corporate tax rate below 25 per cent.
Employer national insurance increases
Starting April 2025, employers will see a 1.2 per cent rise in National Insurance Contributions (NICs), reaching a total contribution rate of 15 per cent from the current 13.8 per cent. Starting in April 2025, the threshold for paying employer NICs will also decrease significantly from £9,100 to £5,000, although the Chancellor promised turnover-based exemptions for smaller businesses. However, the change could substantially impact businesses with larger payrolls due to the additional NIC liability. Minimum wages are also set to rise in April further increasing costs for employers.
Inheritance tax freeze extended to 2030
Labour has extended the freeze on inheritance tax thresholds until 2030, meaning more estates may incur higher tax bills as asset values grow. Additionally, the Budget introduced a reduction in agricultural property relief on farms worth over £1 million, a measure met with criticism from farming communities.
Housing growth and support for housebuilders
As part of Labour’s commitment to support the property industry and build 1.5 million homes over this Parliament, the Chancellor also announced:
- £500 million in additional funding for the Affordable Homes Programme in 2025-26, raising the annual budget to £3.1 billion
- plans to make the Mortgage Guarantee Scheme permanently available to support 95 per cent loan-to-value mortgages
- a consultation on a new social housing rent settlement, allowing rent increases by inflation plus 1 per cent annually for five years
- starting from April 2025, the government plans to reduce discounts available under the Right to Buy scheme. Currently, tenants purchasing their council home can receive discounts up to a maximum of £96,000 outside London and £127,000 within London, depending on the length of tenancy and the type of property
- £46 million to train and recruit 300 graduates and apprentices in local planning authorities, expedite approvals, and support housing and economic growth
Additional support for build-to-rent and SME housebuilders
To support housing supply, £3 billion in housing guarantee schemes was pledged for SME housebuilders and the build-to-rent sector, offering lower-cost funding options and encouraging new construction.
With Labour’s fiscal strategy now underway, what’s next for the property sector? As stakeholders digest the changes and adjust their plans, many are left questioning how these reforms will reshape the property industry in the years to come. How have the changes affected your forward strategy?
