The new UK government has delivered its first Budget and made changes in many areas. The world of property was particularly interested in what the Chancellor, Rachel Reeves, had to say.
The market has returned to growth after two years of struggles and this Budget had the potential to give property another boost.
Overall, it was a positive outcome that promises long-term benefits for property owners, whether you're a homeowner or an investor.
Inflation, interest rates and mortgage costs
Property is a long-term investment for both homeowners and investors. With that in mind, some of the best news from the Budget will have a positive impact in the years to come.
The Chancellor confirmed that the national inflation target will remain at 2%. Even better, bank of England projections showed that this is going to be achievable in every year of this Parliament – from now to 2029.
That has two important impacts. First, if inflation remains stable and low, it means the Bank of England is able to cut the base rate of interest further over the coming months and years.
The most recent cut to 5% seen in August was the first time in almost two years that the interest rate was reduced. That rate was held in September and now speculation is that a further cut to 4.75% will be made in either November or December.
The governor of the Bank, Andrew Bailey, has hinted that they could be “a bit more aggressive” at cutting rates with inflation under control.
The second related effect is that these further interest rate cuts are likely to make mortgage costs cheaper.
High street lenders reduced their rates substantially when rates began to fall and gave an instant boost to the property market. There is no reason to believe mortgage costs will not keep falling when the rates are cut further.
We anticipate that the Budget announcement about inflation will lead to more mortgage reductions and increased market activity over the rest of 2024 and into the next two years. That is great news for everyone interested in seeing the value of their properties increase.
Capital Gains Tax (CGT)
There was speculation before the Budget that capital gains tax (CGT) would be increased from its current rate of 20%. It is paid on any profits you make from the sale of assets, including property, and higher rates would be a concern for both homeowners and property investors.
The government announced that both rates of capital gains tax would increase:
- The lower rate from 10% to 18%
- The higher rate from 20% to 24%
However, it was confirmed that the sale of residential property would be excluded from these rises and the rate for most property sales will remain at 20%.
That means the cost of CGT for anyone selling a property will remain the same as it was previously. Importantly, it will remain very far below the higher and additional rates of income tax (40% and 45% respectively).
That is another big win from the Budget for the world of property both in the short- and long-term.
Stamp Duty Land Tax (SDLT) goes up
Stamp Duty Land Tax (SDLT) is the other major tax people pay when buying a property, or land in England or Northern Ireland and that did go up for some buyers.
Anyone buying a second property will now see a small rate increase reflecting the growing value of their investment. Previously, the additional rate for SDLT on your investment was 3% of the value of the property over £250,000. The new rates will be as follows.
The higher rates from 31st October 2024 to 31st March 2025:
- Up to £250,000 – 5%
- The next £675,000 (the portion from £250,001 to £925,000) – 10%
- The next £575,000 (the portion from £925,001 to £1.5 million) – 15%
- The remaining amount (the portion above £1.5 million) – 17%
The higher rates from 1st April 2025 onwards:
- Up to £125,000 – 5%
- The next £125,000 (the portion from £125,001 to £250,000) – 7%
- The next £675,000 (the portion from £250,001 to £925,000) – 10%
- The next £575,000 (the portion from £925,001 to £1.5 million) – 15%
- The remaining amount (the portion above £1.5 million) – 17%
You can calculate your stamp duty land tax here.
That will add costs for investors, however it is worth remembering that we are at the start of a new property cycle and house prices are expected to increase by an average of 21.6% across the UK by the end of 2028 according to Savills.
In regions like the North West, growth will be even higher at 28.8% over that time period.
That means if you buy UK property or invest in Manchester apartments for sale, your property is likely to grow in value by far more than the increase in Stamp Duty. When it does, you will pay the same capital gains tax as before when it comes to selling up.
While the Stamp Duty increase may seem challenge, investing in UK property—a valuable asset likely to appreciate well beyond the upfront costs—ensures strong long-term gains. From this perspective, UK property remains one of the best investments you can make.
Will overseas buyers pay more?
Overseas buyers investing in UK property continue to pay a 2% surcharge introduced three years ago, remaining stable in this year's Budget.
This is great news for overseas buyers, who won’t face any extra surcharge beyond the existing Stamp Duty. While costs will rise for everyone, the projected property value growth more than offsets these initial expenses, making UK property a valuable investment.
There are still many compelling reasons why overseas buyers should invest in the UK. This strong, stable and growing market is the best prospect available for investors and will remain so for many years to come – especially if you buy in the UK’s strongest established and emerging buy to let markets.
Inheritance tax
Another area of concern for both homeowners and property investors was inheritance tax. However, fears that the tax rates would be increased proved to be incorrect.
The Chancellor kept everything the same, meaning that you will pay nothing on the first £325,000 you pass on, rising to £500,000 if the estate includes a residence given to a direct descendant.
After that, the rate is 40% on anything above that threshold. This means that you will not pay more than you would have before the Budget.
First time buyers
The threshold for stamp duty relief for first-time buyers was raised from £300,000 to £425,000 in September 2022. However, this benefit was introduced as a temporary measure and is scheduled to end in April 2025.
As it stands, buyers in the process of purchasing a home will need to move quickly to avoid higher stamp duty costs. If this relief is rolled back, it will make it even more challenging for people to step onto the property ladder which will only increase rental demands especially in major city centres like Manchester, London and Bristol.
Want to learn more about our UK property investments for sale or get further insight into the best places to buy property in the UK? Contact our team today.
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