Chancellor Rachel Reeves has delivered the Autumn Budget — Labour’s first Budget for more than 14 years — in the House of Commons.
Ms Reeves’s first major announcement was that this Budget will raise taxes by £40 billion to plug a £22 billion “black hole” in the public finances and drive economic growth.
Stamp duty tax will rise next year as expected and capital gains tax is to remain at its current rates for residential homes, see details below, but the Chancellor’s speech contained a series of other property announcements that are set to impact the UK housing market.
Stamp duty land tax to increase
On stamp duty, Ms Reeves led with the announcement that the surcharge on purchases of second homes and buy-to-let properties is to increase from three to five per cent from tomorrow.
"The extra two per cent cost on buying second homes and investment property will reduce demand from second home buyers and investors,” said Richard Donnell, Head of Research at Zoopla.
“Second home buyers are already responding to last year’s Budget which allowed councils to charge double council tax for second homes. This is resulting in a higher level of selling by second home owners. In areas with above average second homes we have seen four times more homes come to the market.”
What about stamp duty for first-time buyers?
There was no mention of freezing stamp duty thresholds in the Budget which means thresholds will increase for homebuyers from the end of March 2025 as planned.
Property tax breaks have been in place since the mini-Budget of September 2022, but they now will revert to their old rates in spring.
Homebuyers in the most expensive areas of England and Northern Ireland — in particular London and the South East — will be most impacted by increases to thresholds due to high average property prices.
“In parts of London with home values over £600,000, first-time buyers could pay an additional £15,000 in stamp duty,” said Mr Donnell. “Buyers will want to take this off the price they pay for homes, keeping price rises in check.”
There will no longer be first-time buyer relief on properties priced up to £625,000 – the total property price must be no more than £500,000 for any first-time buyer savings on stamp duty to apply.
Regarding higher stamp duty costs for first-time buyers, Tim Bannister of Rightmove said: “After paying fees, carrying out any surveys, and stretching their budget with high mortgage rates, this will be an unwelcome additional charge next spring.”
Stamp duty thresholds from the end of March 2025
Price of property |
Stamp duty (from 1 April 2025) |
Up to £125,000 |
Zero |
The portion from £125,001 to £250,000 |
2% |
The portion from £250,001 to £925,000 |
5% |
The portion from £925,001 to £1.5 million |
10% |
Anything above £1.5 million |
12% |
First-time buyers will be exempt from stamp duty up to £300,000 as long as the total property price is no more than £500,000.
Anyone buying an additional property to their main residence must pay a five per cent surcharge from October 31, while non-UK residents will continue to pay a two per cent surcharge.
Except for the increased surcharge on buy-to-lets and second homes, current stamp duty thresholds are in place until 31 March 2025.
“We find stamp duty presently keeps owners in homes they don’t need or want, reduces choice and inflates cost for those wanting to buy or rent, to say nothing of the effect on job and social mobility,” said London agent and former RICS chairman Jeremy Leaf.
“Stamp duty could be replaced by a fairer distribution of council tax which is based on values over 30 years old, particularly for higher-end homes.”
Capital gains tax for residential property remains the same
Capital gains tax for residential homes is to be held at current rates: 18 per cent and 24 per cent. On other assets, the lower rate of capital gains tax is to be increased from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent.
Capital gains tax (CGT) is payable on profit made by the value increase of an asset — such as a house — after its sale.
The tax payable is not based on the amount of money you receive for the asset but the gain you make.
You pay on profit made when you sell property that’s not your main home. For example a buy-to-let property, land or inherited property.
Although there are some exceptions, for example main homes with grounds of over an acre, most owner-occupied homes qualify for private residence relief and are therefore exempt from any capital gains tax.
Affordable housing
Ms Reeves reiterated Labour’s manifesto promise to build 1.5 million homes over the course of this Parliament.
The Chancellor has committed £5 billion of investment to deliver plans on housing next year. As part of this investment, there will be a £500 million boost to the Affordable Homes Programme to build up to 5,000 extra homes.
There will also be £3 billion support for small and medium entreprises and the Build to Rent sector in the form of housing guarantee schemes.
Right to Buy discounts will be reduced and local authorities will be “able to retain the full receipts generated by sales” to be able to protect existing council housing stock.
“We welcome the measures announced today to boost social housing,” said Tom Darling, director of the Renters’ Reform Coalition. “This must only be a down payment on much more funding to come in the next spending review.”
“Insufficient detail was provided on the unquestioned need to improve numbers to rent and buy as well as transactions, in view of their multiplier influence on growth,” said Mr Leaf.
“The price of fixing the housing crisis is huge but of not doing enough or quickly is even higher, not least given the huge cost of providing temporary accommodation and housing benefit.”
Freedom to Buy
The mortgage guarantee scheme currently allows lenders to offer 95 per cent mortgages through state-backed loans but the scheme is temporary and due to end in June 2025.
The Budget 2024 report states that the Government plans to make the mortgage guarantee scheme “permanently available” but will release more details in Phase 2 of the Spending Review which will conclude in spring 2025.
Cladding
The Chancellor has announced more than £1 billion investment to remove dangerous cladding from homes next year. This includes new investment to speed up remediation of social housing.
