The Autumn Budget is fast approaching and with a new government at the helm, some big changes are expected. But what should homeowners, landlords and first-time buyers prepare for? We find out…
Chancellor Rachel Reeves will present her inaugural budget on Wednesday, October 30 – but what announcements, if any, are likely to impact homeowners?
In the run-up to the first Budget since Labor came to power, there has been much speculation and rumors about capital gains tax (CGT) increases, which will impact buy-to-let landlords and investors.
Meanwhile, one of the party’s election promises was the introduction of the Freedom to Buy scheme for starters. Will we finally see these proposals become reality?
We look at how the budget could impact homeowners and what potential changes are on real estate experts’ wish lists.
Stamp duty: will there be relief for buyers?
Currently, first-time buyers are exempt from stamp duty on up to £425,000 of the price of their property. This threshold was increased from £300,000 to £425,000 in the mini budget in 2022 as a temporary measure. But it will be reversed again in April 2025.
For those moving, there will be a stamp duty charge of £250,000 – but under the same rules applied in the mini budget, this will return to £125,000 in April 2025,
Now that there is a new government, is there a chance that these tax thresholds will be frozen?
A survey of more than 200 UK homeowners by David Wilson Homes found that 76% support a review of stamp duty thresholds, while 32% strongly support it. Meanwhile, Benham and Reeves also surveyed first-time buyers, 67% of whom were hoping for a stamp duty holiday.
But despite pressure on the government to freeze the thresholds at current levels, reports suggest Rachel Reeves will implement the planned changes.
Paula Higgins, chief executive of the HomeOwners Alliance, said: “These changes will make it even harder for people to buy their first home if the first stamp duty is reduced to £300,000.
“In this budget we call on the government to do so scrap stamp duty absolutely. Over the past ten years, there have been as many adjustments to land tax as there have been new Housing Ministers.
“This fruitless fuss has done little to address the fundamental problem that stamp duty is a tax on home ownership that is a major obstacle to the proper functioning of the housing market.”
Freedom to buy: will there be more help for starters?
One of Labour’s election promises was to strengthen the mortgage guarantee scheme, an initiative by the Conservative government to help first-time buyers gain access to mortgages with low deposits.
The plan would be renamed the Freedom to Buy scheme and improved, but so far there is no information.
Higgins said: “Few details have been released about how it will work. We hope the Budget will shape this and provide more information on how the Freedom to Buy program will work.”
It is also hoped that the Chancellor will give new buyers a boost by making improvements to the Lifetime ISA (LISA) scheme.
The savings plan allows first-time buyers to save up to £4,000 a year, tax-free and with a 25% government bonus. But currently there is an outdated punishment.
Higgins said: “By removing the outdated 6.25% LISA penalty for people buying a home above the current price limit of £450,000 – a threshold that has not changed since 2017 – more people would have the confidence to buy into the savings scheme.
“Londoners are being denied access to the scheme, while the average house price now stands at £520,000. The government must find a way to ensure that these schemes keep pace with the reality of house prices and that people who want to use their savings to buy a home are not punished.”
Capital gains tax (CGT): will it be increased?
Speculation surrounding Rachel Reeves’ plans for capital gains tax (CGT) was rife in the run-up to the Budget. Much of the buzz supports the view that the Chancellor will increase CGT.
If CGT were to rise, it would impact landlords and property investors who provide rentals, as the tax applies to second properties – and not your main residence.
A survey by AJ Bell found that more than a quarter of advisers had seen an increase in CGT inquiries, while a fifth saw an increase in the number of clients looking to sell assets and realize a profit ahead of the Budget.
There was also an increase in the number of landlords in September, move their properties to more fiscally efficient limited liability companies.
Higgins said while it wasn’t good for homeowners, raising taxes wouldn’t be disastrous for all homeowners.
“Many landlords have already started selling buy-to-let properties in anticipation of these predicted changes,” she said, “with Capital Economics predicting a major exodus of rental properties over the next decade.
“We don’t think this is all bad. One million new homes available to buy will help a significant number of first-time buyers realize their dream of home ownership.”