Budget - no surprises... or were there?

Labours first budget in 14 years felt a long time coming in every sense, with many lenders and clients all waiting for what we knew to be confirmed.

Possibly the most hyped budget since the 80’s, record tax hikes, large-scale borrowing and substantial provisions for public services, increase in government spending aiming to address a £22 billion budget ‘blackhole’ and “fix the NHS and rebuild Britain.”

As we know, much of this increase will be funded by the increase 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.

We wanted to make sure we gave a specific overview of how this impacts all associated with property. This Budget introduces changes across stamp duty, corporation tax, inheritance tax, planning, housebuilding and support for build-to-rent projects.

Below are our key areas of note for those in the property sector:

Capital gains tax unchanged on residential properties

Thankfully, capital gains tax (CGT) on residential property sales remained untouched, which offers some stability for our clients managing their portfolios. However, 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

An increase we weren’t expecting was that they have raised the higher rate of stamp duty land tax (SDLT) for additional dwellings from 3 per cent to 5 per cent. Effective from 31 October 2024, this change impacts second homes, buy-to-let properties and residential purchases by companies. This has caught many property professionals and 2nd home owners out and impacted potential plans for the future. If this has impacted you or you would like to discuss how to manage this effectively – do get in touch.

Corporation tax capped

For our property investors using a limited company structure, corporation tax will remain capped at 25 per cent for now. As you will be aware limited companies with profits up to £50,000 are taxed at 19 per cent, rising incrementally to 25 per cent for profits exceeding £250,000.

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

The chancellor has extended the freeze on inheritance tax thresholds until 2030, meaning more estates may incur higher tax bills as asset values grow. However, the Budget introduced a reduction in agricultural property relief on farms worth over £1 million, which has had a big impact on many of our clients. Again, do get in touch if this has impacted your business.

Housing growth and support for housebuilders

As part of the governments 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 this new budget in place, we’re meeting with many of our clients to review the bottom line impact on their existing properties and businesses. We’re also helping to discuss the next steps and check the existing and above changes are aligned to their property based plans and strategy.

How will this impact your plans? Get in touch to discuss with one of the team. It costs nothing to talk through some options and review, the benefits however will be invaluable.