The 2024 Autumn Budget: Impact on the Premium Property Market
Chancellor Rachel Reeves has unveiled her first Autumn Budget, introducing several measures that will affect the UK's premium residential property market.
In this article we share some early reactions to the changes made in today's long anticipated budget.
Taxes have been announced to be raised by £40 billion, the bulk of which will come from NI contributions paid by employers, along with changes to Capital Gains Tax (CGT) and Inheritance Tax (IHT).
At By Design, we're here to help you navigate these changes and understand their implications for the premium property market, so here are some considerations fresh from today's announcements.
Overall economic outlook and market stability
The Office for Budget Responsibility (OBR) has projected modest economic growth over the coming years, with real GDP growth expected to reach 2% by 2025. This gradual recovery could provide a stable foundation for the premium property market, potentially encouraging investment in luxury homes and estates.
Stamp Duty Land Tax (SDLT) adjustments
One of the most significant announcements for property buyers is the increase in the stamp duty land surcharge for second homes. From tomorrow, this surcharge will rise by 2% to 5%.
However, this is unlikely to significantly affect most premium property buyers, as these homes are more often purchased as primary residences. The impact will be more pronounced for the holiday home and investment markets. For clients seeking primary residences in the premium sector, this surcharge won't apply, maintaining the attractiveness of high-end properties.
The standard rates for SDLT on premium properties remain unchanged:
10% on the portion between £925,001 and £1.5 million
12% on the portion above £1.5m
While these rates are substantial, they have not changed, providing some stability in the market.
Capital Gains Tax
Whilst CGT has increased from 10% to 18% for basic rate taxpayers, and 20% to 24% for those who pay at the higher rate, this now matches the existing rates for property which will stay the same. Thankfully, there was no change to CGT on those selling their primary residence as some had feared.
Justifying the rise, Reeves said “We need to drive growth, promote entrepreneurship and support wealth creation while raising the revenue required to fund our public services and restore our public finances,”
“This means the UK will still have the lowest capital gains tax rate of any European G7 economy,” she added, which may counter what the revised version of the 'Non Dom' status is, which is being abolished in April next year.
No Mansion Tax
Contrary to some pre-budget speculation, a "mansion tax" was not introduced. This is welcome news for owners and potential buyers of premium properties, as it maintains the current tax structure for high-value homes.
Inheritance Tax
Although there were changes to the way pensions, businesses and agricultural assets are taken into consideration for IHT purposes, there was no change to the way primary residences are considered. This again provides some stability to the premium market.
VAT on Private School Fees
The standard 20% VAT rate will be added to private school fees from January. Given the correlation between the premium market and families with children in private schools, this could mean an increase in families choosing to move or downsize to accommodate the increase in fees, or move to an area with top-tier state schools (which will likely see an increase in house prices after today).
David Lindley, CEO at By Design, comments 'Today wasn't the 'Starmergeddon' budget many had feared, thankfully. Aside from the policy changes that directly affect the property market, it is hard to know what knock-on impact other policy changes, such as those to Business Disposal Relief, might have on the premium property market as business owners might 'rush' to sell companies before the change in April for example, so potentially freeing up cash for a home purchase stoking demand.'
'Arguably just as pertinent is the Bank of England's decision regarding interest rates in November, some good news then could have more positive impact on the property market than today's announcements.' adds Lindley.
Image credit: https://hellorayo.co.uk/greatest-hits/uk/news/rachel-reeves-labour-budget/
Get in touch with us
First Name*
Last Name*
Mobile Phone*
Your Email Address*
Are you looking to*
Please enter message here*
Please confirm that it is okay for us to contact you about this information as well as products and services. (You will always be given the right to unsubscribe at any point in the future)*
