Second home stamp duty raised to 5% from tomorrow, but relief for first-time buyers and home movers remains until April 2025. Capital Gains Tax increased and thousands of affordable homes to be built. How the Autumn Budget impacts the housing market.
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Stamp duty increased to 5% on second homes
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Higher stamp duty thresholds remain in place for first-time buyers and home movers until April 2025, but are set to be lowered after then
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Capital Gains Tax increased but rates on residential property sales to remain at 18% and 24%
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£500 million pledged for affordable housing
In Labour’s first budget for 14 years, the country’s first female Chancellor, Rachel Reeves, emphasised she’d inherited a ‘dire’ situation from the Conservatives and had to make difficult choices to fix the foundations for the UKs economy.
Overall, taxes were raised by £40 billion, the upper end of what economists had predicted. The bulk of the money raised will come from National Insurance contributions paid by employers, which will make up £25 billion of the total.
Further revenue will be raised by Capital Gains Tax, closing inheritance tax loopholes and increases in stamp duty for second home buyers, which will raise a further £9 billion.
So what does it all mean for the housing market?
Stamp duty on additional homes raised from 3% to 5%
From tomorrow, people buying an additional home will need to pay an extra 2% of the entire property cost in stamp duty.
Second-home stamp duty rates today are currently 3%, meaning buyers pay an additional 3% of the entire value of the property on top of any standard stamp duty that’s payable.
But from tomorrow, that 3% rate rises to 5%.
So, the new stamp duty bands will be:
For the portion between £0 – £250,000 – 5% stamp duty
For the portion between £250,000 – £925,000 – 10% stamp duty
For the portion between £925,00 – £1.5m – 15% stamp duty
For the portion above £1.5m – 17%
The move is likely to unsettle property investors, in a market where many landlords are already selling and 12.5% of homes currently for sale are former rental properties.
This is reducing the amount of rented accommodation available to renters, causing competition for homes and in turn pushing up the cost of renting.
The private rented sector has seen static supply since tax changes were introduced in 2016. There is a steady net selling by landlords in response to changes in tax policies, alongside greater regulation of housing and higher mortgage rates.
‘We need to keep as many landlords as possible in the market to provide choice for renters who are currently facing limited options. Rents rising faster than earnings is hitting those on the lowest incomes the hardest.’
Reeves said this increase has been made to support people buying their first home or moving home, and kept the current raised stamp duty threshold in place for first-time buyers and home movers until April 2025.
Stamp duty threshold held for first-time buyers and home movers until April 2025
First-time buyers will continue to benefit from a raised stamp duty threshold until April 2025, meaning they won’t have to pay any stamp duty on properties costing up to £425,000.
However, from next April, the stamp duty threshold will be lowered to £300,000.
For now, for properties costing between £425,000 and £625,000, first-time buyers will need to pay 5% tax on that particular portion of the property. And for properties costing over £625,000, normal stamp duty rates apply.
But from April 2025, first-time buyers will need to pay stamp duty of 5% on the portion of the property between £300,000 to £500,000.
For home movers selling their home to buy their next home, the stamp duty threshold of £250,000 also remains in place until April 2025:
For homes costing over £250,000 you’ll need to pay 5% on the portion up to £925,000.
For homes costing over £925,000, you’ll need to pay 10% on the portion up to £1.5m.
And for homes costing over £1.5m, you’ll need to pay 12% on the portion over £1.5m.
However from April 2025, the stamp duty threshold for home movers will be lowered to £125,000 and 2% stamp duty will need to be paid on the portion between £125,000 and £250,000.
How much can I borrow?
Get an idea of what you might be able to borrow for your next home.
Capital Gains Tax increased but rates on property left untouched
Capital Gains Tax is the tax charged on profits made from the sale of assets, including second homes.
Today the chancellor increased Capital Gains Tax for lower rate taxpayers (those earning under £50,270 a year) from 10% to 18% and the rate for higher rate taxpayers (those earning over £50,270) from 20% to 24%.
However, the rates on residential property sales will remain at 18% and 24%.
‘This means the UK will still have the lowest capital gains tax rate of any European G7 economy,’ said Reeves.
Inheritance tax rules for property held until 2030
The inheritance tax rules for property will remain the same until 2030.
Currently the first £325,000 of a property’s value can be inherited tax-free. This rises to £500,000 if the property is passed on to direct descendants: children and grandchildren.
And £1 million if a property is passed onto a spouse and then inherited by direct descendants.
Find out more about the inheritance tax rules for property and stamp duty.
However, the inheritance tax rules are set to change when it comes to inherited pensions from April 2027, when unused pension funds and death benefits will be included within the value of a person’s estate for inheritance tax purposes.
£500 million for affordable housing
Reeves announced £500 million for affordable housing as part of a package worth £5 billion to deliver 33,000 new homes, boost supply and support small housebuilders.
Several sites across the country have already been earmarked for development, including Liverpool Docks, where 2,000 new homes are to be built, and Cambridge, ‘to help realise its full growth potential’.
The government also plans to increase the supply of affordable housing by reducing Right to Buy discounts so that more council homes remain within the sector.
In a statement, the government said England’s existing social housing supply is ‘depleted every year by the Right to Buy scheme, while also disincentivising councils to build new social housing’.
Local authorities can now retain full receipts from transactions so that the money can be reinvested back into housing stock.
he Budget focus on housing is rightly on the long term plan to grow housing supply and inject funds to support more affordable homes alongside a much needed rent settlement for social housing providers.
Many of the pressures in the housing market come from a lack of supply or not enough of the right kind of homes, so growing supply is a top priority but it is far from a quick fix.
‘The housing market needs long term solutions that lead to a better market for all over 5, 10 and 20 years. Growing supply is the no 1 priority and this needs a multi pronged approach, which involves much more than simply adding a bit more money to the affordable housing program.
Dangerous cladding
Following the Grenfell Tower fire in 2017, Reeves also pledged £1 billion of investment to remove dangerous cladding from high rise apartment blocks next year.
Other changes Rachel Reeves’s Autumn Budget that might affect household budgets; minimum wage rises to £12.21 an hour, National Insurance is frozen for employees and pensions increased.
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Minimum wage rises to £12.21 an hour as National Insurance is frozen for employees
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Pensions triple lock kept and fuel duty freeze continued
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Carers allowance weekly earnings limit increased and Universal debt repayments percentage lowered
‘On July 4 the country voted for change,’ said Chancellor Rachel Reeves in the UK’s first Labour budget in 14 years.
And change must be felt through more money in people’s pockets, an NHS that is there when you need it and through an economy that is growing, creating wealth and opportunity for all, because that is the only way to improve living standards.’
Reminding people that it was a Labour government that rebuilt Britain from the rubble of the Second World War in 1945, Reeves added: ‘Today, it falls to this Labour government to rebuild Britain once again.”
In the first budget in our country’s history to be delivered by a woman, Reeves commented: ‘I’m deeply proud to be Britain’s first ever female Chancellor of the Exchequer. To girls and young women everywhere, let there be no ceiling on your ambition, your hopes and your dreams.’
Adding that Labour had a responsibility to pass on a fairer society and a stronger economy to the next generation of women.
Of the last Conservative government, Reeves said: ‘Their austerity broke our NHS, their Brexit deal harmed British business and their Mini budget left families paying the price for higher mortgages.’
All of which left ‘a black hole in the British finances and public services on their knees.’
Reeves said there was a £22 billion black hole in the public finances which showed hundreds of under-funded pressures in the public finances, adding: ‘Never again will we allow a government to play fast and loose with the public finances.’
Outlining a plan to implement in full the 10 recommendations from the OBR, Reeves planned to tackle ‘inherited broken public finances and services too,’ which included:
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NHS waiting lists at record levels
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Children in Portakabins as school roofs crumble
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Trains that don’t arrive
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Prisons overflowing
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Criminals who are not punished.
She also outlined ‘vital compensation schemes for victims of two terrible injustices: the infected blood scandal and the Post Office horizon scandal,’ with £11.8bn outlined for victims of the infected blood scandal and £1.8bn for the victims of the Post Office Horizon scandal, which were ‘long overdue for the pain and injustice people have suffered.’
In a budget designed to raise taxes by £40bn, Reeves pledged to ‘rebuild our public services’ while maintaining the Bank of England’s 2% inflation target, reducing borrowing and enabling real GDP growth, predicted to reach 1.6% by 2029.
Government savings
Reeves pledged to set a 2% savings target for all government departments to meet next year.
She also appointed a Covid Corruption Commissioner to uncover the companies that used a national emergency to line their own pockets.
And outlined plans for a crackdown on fraud in the welfare system, which is ‘often the work of criminal gangs’.
Counter fraud teams will be appointed to prevent illegal activity alongside new legal measures – including direct access to bank accounts to recover debt – which is intended to raise £4.3bn.
Tax and the cost of living
To ensure people pay what they already owe, Labour plan to modernise HMRC’s systems, cracking down on umbrella companies that exploit workers, while going after promoters of tax avoidance schemes. This will raise £6.5bn for the treasury.
Minimum wage rises to £12.21 an hour
‘Family finances are stretched and paychecks don’t go as far as they once did,’ said Reeves. ‘Today we are supporting people with the cost of living.’
Labour introduced the national minimum wage in 1999 and today Reeves announced plans to increase the National Living Wage by 6.7% to £12.21 an hour, worth up to £1,400 a year for a full-time worker.
‘For the first time, we will move towards a single adult rate phased in over time by initially increasing the National Minimum Wage for 18-20 year olds by 16.3%, as recommended by the Low Pay Commission, taking it to £10 an hour.’
Carers allowance weekly earnings limit increased
‘Carers are looking to increase the hours they work,’ said Reeves.
Carers allowance currently provides £81.90 a week to help those with additional caring responsibilities.
‘Today, I can confirm that we are increasing the weekly earnings limit to the equivalent of 16 hours at the National Living Wage per week, the largest increase in Carer’s Allowance since it was introduced in 1976.
‘That means a carer can now earn over £10,000 a year while receiving Carer’s Allowance, allowing them to increase their hours where they want to and keep more of their money.’
Universal debt repayments percentage lowered
Reeves announced £1 billion to extend the household support fund and discretionary housing payments to help those facing financial hardship.
She also pledged to reduce the level of debt repayments taken from universal credit from 25% to 15% of a standard allowance.
This means ‘1.2 million of the poorest households will keep more of their money each year, up to £420 a year.’
Workers’ rights
Reeves outlined plans to protect working people from unfair dismissal, safeguard them form bullying and provide better access to maternity and paternity leave.
Pensions triple lock kept
Pledging to keep the pensions triple lock, Reeves said spending on pensions will rise to £31 billion by 2029/30.
The new state pension will be uprated by 4.1% in 2025-26, meaning 12 million pensioners will gain up to £470 next year.
The Pension Credit Standard Minimum Guarantee will also rise by 4.1% from around £11,400 per year to around £11,850 for a single pensioner.
Fuel duty frozen
‘Increasing Fuel duty next year would be the wrong choice,’ said Reeves. ‘So I’ve decided to freeze fuel duty next year and save the 5p cut next year too. There will be no higher taxes at the petrol pumps next year.’
National insurance frozen for employees
‘I will not increase your national insurance, VAT or Income Tax,’ said Reeves.‘Working people will not see higher taxes in their payslips. A promise made and a promise fulfilled.
‘But to raise the revenues required to fund our public services & to restore public stability, I will increase employers’ national insurance by 1.2% to 15% by April 2025.’
There will be no extension of the freeze in income tax and national insurance thresholds and instead personal tax thresholds will be uprated inline with inflation once again.
‘This government chooses to protect working people every single time,’ said Reeves.
Tobacco and soft drinks
The price of tobacco will rise inline with the Retail Price Index +2% and duty will be added on vapes from 2026.
A soft drinks industry levy will also be introduced, increasing duty inline with Consumer Price Index going forward.
These measures are designed to raise £1 billion a year.
Air passenger duty
Has not kept up with inflation in recent years, so Labour are introducing an adjustment, which will mean an increase of no more than £2 for a standard economy flight.
However, for those lucky enough to fly by private jet, the news is not so good. Air passenger duty will rise by 50%, costing around £450 per passenger for a private jet to California.
Alcohol duty
Duty rates on non-draught products are set to increase along with the Retail Price Index next year. However draught duty will be cut by 1.7%, cutting ‘a penny off the pint in the pub’.
Private schools and VAT
Currently 94% of the UK’s children attend state schools.
In a move designed to raise £9 billion for the treasury, ‘We will introduce VAT on private school fees from January 2025, and remove business rates relief too,’ said Reeves.
Breakfast clubs at schools
‘Every child deserves to have very best start in life and the very best start to the school day too, so we’re tripling investment in breakfast clubs to fund them in thousands of schools,’ said Reeves.
The core schools budget will also be increased by £2.3 billion to hire thousands more teachers into key subjects.
A further £300m was pledged for further education, as SEN provision to improve outcomes for the most vulnerable children is to receive a £1 billion uplift in funding, up 6% from this year.
Schools in general will be given a 19% increase in funding through £6.7bn of capital investment to the Department for Education.
£1.4 billion has been earmarked for the schools in greatest need and a further £2.1 billion more for school maintenance.
NHS funding
The NHS will receive a £22.6 billion increase in its day to day health budget and a £3.1 billion increase in its capital budget. ‘The largest real terms growth outside of Covid since 2010,’ said Reeves.
The funding is designed to deliver repairs and upgrades to NHS buildings, increase capacity for tens of thousands of procedures and fund additional new beds.
Labour also plans to launch new surgical hubs and diagnostic centres, so people waiting for treatment can get it as quickly as possible.
‘We can now begin to bring waiting lists down,’ said Reeves. ‘Our target for waiting list times will be no longer than 18 weeks.’
‘These are the right choices to fix our NHS, protect working people and rebuild Britain.
‘More teachers in our schools, more appointments in our NHS and more homes being built.’
