Chancellor Rachel Reeves’ first Budget statement announced that taxes will rise by £40bn in order to fix the ‘black hole’ inherited from the previous government and to deliver growth in the near future.
Whilst the manifesto pledges to avoid raising income tax, VAT or National Insurance were largely respected (although some debate on whether this is the case seems likely given a prominent increase in the rate of employer’s NIC), a raft of tax announcements are likely to directly and indirectly affect those working and investing in the property industry.
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National Insurance
There was bad news for employers, as Reeves announced that National Insurance contributions by employers will rise from 13.8% to 15% from April 2025.
In addition, the threshold at which businesses start paying National Insurance on a workers’ earnings will be lowered from £9,100 to £5,000.
Smaller employers will be sheltered somewhat from the increase as the Employment Allownce will increase from £5,000 to £10,500 and will be able to be claimed by all employers.
Exploring pension salary sacrifice arrangements could be beneficial, and businesses may want to consider accelerating bonus payments scheduled for April to avoid the rate increase. Owner-managers should also re-visit their remuneration strategies in light of these changes.
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Capital Gains
The rates on residential property will remain at 18% and 24%.
The basic and higher rates of capital gains tax will increase to 18% and 24% respectively with effect from 30 October 2024.
Business Asset Disposal relief will remain, but the current 10% rate on the first £1m of qualifying lifetime gains will increase to 14% from 6 April 2025 and then 18% from 6 April 2026.
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Inheritance Tax
Reeves said she will extend the inheritance tax threshold freeze for a further two years to 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner, she said.
She added that she will bring inherited pensions into inheritance tax from April 2027.
Crucially, Business Property Relief and Agricultural Property Relief will be reformed from April 2026. Both of these reliefs will be restricted to £1m from 2026 (amounts in excess of £1m to receive 50% relief. There is to be 50% IHT relief for AIM and similar shares.
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Stamp Duty Land Tax
Reeves announced that the government will increase the stamp duty land surcharge for second-homes and residential properties bought by companies by 2% to 5% from 31 October 2024. The government will also increase the single rate of SDLT payable by companies and non-natural persons acquiring dwellings for more than £500,000, from 15% to 17%.
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Corporation tax
A new corporation tax roadmap is intended to provide certainty to business, and will commit to preserving the current 25% main rate of corporation tax.
The capital allowance regime will remain largely unchanged, with the £1m Annual Investment Allowance and full expensing regimes continuing.
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Business rates
For 2025-26, eligible retail, hospitality and leisure (RHL) properties in England will receive 40% relief on their business rates liability. RHL properties will be eligible to receive support up to a cash cap of £110,000 per business. In addition, the government intends to introduce permanently lower multipliers for RHL properties from 2026-27, paid for by a higher multiplier for properties with Rateable Values above £500,000
For 2025-26, the small business multiplier in England will be frozen at 49.9p. The government will lay secondary legislation to freeze the small business multiplier. The standard multiplier will be uprated by the September 2024 CPI rate to 55.5p
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Land remediation relief
The government will launch a consultation in spring 2025 to review the effectiveness of Land Remediation Relief.
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Reform of the non-dom regime
The concept of domicile will be removed and replaced with a new residence based regime. Further details as to how this will work are awaited.
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Right to Buy discounts
The chancellor is slashing the ‘right to buy’ discount given to those purchasing their council home and allowing councils in England to retain all sales receipts, supporting existing council housing stock and enhancing council capacity to provide vital social housing.
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New homes
The chancellor says the government will invest more than £5bn to deliver their housing plan.
The government is taking action to increase housing supply, including £56million to unlock over 2,000 new homes at Liverpool Central Docks, and a £25 million investment in a joint venture to deliver 3,000 energy-efficient homes, all aimed to be affordable. Additionally, £47million will help deliver up to 28,000 homes stalled due to nutrient neutrality issues.
The government will also engage with industry this autumn regarding the mortgage guarantee scheme, aiming to make it permanently available at 95% lending. This initiative will provide lenders with confidence and ease the path for first-time buyers to achieve homeownership, with further details expected in Phase 2 of the Spending Review.
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Affordable housing
The Affordable Homes Programme will be increased to £3.1bn and the Budget will provide £3bn worth of support and guarantees to increase the supply of homes and support small housebuilders. The programme will support the building of up to 5,000 additional affordable homes. Future grant investments will be outlined in Phase 2 of the Spending Review, focusing on new affordable housing for social rent, and will extend for the duration of this Parliament.
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Planning Reforms
Housing delivery requires reforms to the planning system and sufficient capacity to support economic growth. The government is allocating £46 million for the recruitment and training of 300 graduates and apprentices in local planning authorities, aimed at expediting large projects and enhancing local authority capacity.
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Long-term Rent Settlement
A consultation will be held on a new social housing rent settlement of CPI+1% for five years, offering long-term certainty for social housing providers to build tens of thousands of new homes. Further measures, such as a potential 10-year settlement, will also be considered.
Tom Roseff, Tax Partner, commented: “Whilst buy-to-let landlords and second homeowners may have been relieved to see current rates of Capital Gains Tax left unchanged, the increase in the SDLT surcharge seems likely to further discourage new investment into the residential sector. With nothing to ease the pressure on already struggling buy to let landlords this latest blow seems likely to see more seeking to exit the sector. The impact of this on a rental sector already suffering from an undersupply of properties remains to be seen.
For a Budget presented as the first step towards fixing the finances and stimulating growth, with a noticeable lack of incentives to encourage new investment by businesses or for first time buyers to get onto the property ladder, it’s hard not to think that an opportunity has been missed.”
Zoe Roberts, Tax Partner, commented: “Many may well be thinking that ‘things could have been worse’. Some certainty for businesses on corporation tax rates and the capital allowance regime is to be welcomed, but this alone seems unlikely to really stimulate growth.
Business rates support for the leisure, hospitality and retail businesses will offer some relief for sectors which arguably would have benefitted from more assistance. Many will however be thinking that these measures may be outweighed by the additional employment costs arising from the Employer’s NIC changes.
More generally, landlords and second homeowners have again borne the brunt of today’s announcements, with an additional SDLT cost on the acquisition of new properties making further investment in the sector less attractive. It’s also disappointing that the Chancellor has not taken the opportunity to support first time buyers.”
Read more about the Autumn Budget 2024 here
