THE GOVERNMENT BUDGET AND THE PROPERTY MARKET
Rachel Reeves’ autumn Budget brought with it a mix of ambitions for growth and revenue generation alongside policy shifts that directly impact the property sector. As conveyancers, our focus naturally zooms in on the measures that affect property buyers and investors. The government’s emphasis on raising revenue while supporting first-time buyers is commendable, but as with any fiscal change, the devil is in the detail and there may have been opportunities missed to support a fluid property market.
Stamp Duty: Raising the Bar on Second Homes
The most significant property-related policy in this budget is the increased stamp duty surcharge on second homes and buy-to-let properties, which now stands at five percent, up from three. This rise, effective from 31st October, will have a direct impact on property investors, developers, and those purchasing holiday homes.
Reeves justified this surcharge increase as a measure to “support over 130,000 additional transactions from people buying their first home or moving home.” While the intent is to level the playing field for first-time buyers, the immediate effect is a steep increase in costs for second-home buyers, requiring careful financial planning and budgeting. For clients, we advise consulting with legal and financial professionals to fully understand the new surcharge and its impact on their upfront financial commitments.
Lack of Extension for First-Time Buyer Relief
One critical point missing from this budget is an extension of the current SDLT relief for first-time buyers. At present, first-time buyers pay no stamp duty on property purchases up to £425,000, but this relief will revert to £300,000 on 31 March 2025. Additionally, the nil-rate threshold for all buyers, which currently stands at £250,000, will fall back to £125,000 on 1 April 2025.
These changes will likely create a surge in transactions in the lead-up to March 2025 as buyers try to benefit from the existing reliefs before they expire. This temporary spike could lead to market stagnation post 31 March 2025, particularly if affordability concerns arise and interest rates remain elevated. In the new-build market, developers may need to respond with additional incentives to maintain demand after these reliefs expire.
Capital Gains Tax and Property Investors
The government has raised Capital Gains Tax (CGT) rates to 18 percent for basic-rate and 24 percent for higher-rate taxpayers. Notably, residential property gains have been spared these changes, which will come as a relief to many landlords and property investors. Nonetheless, with the increased SDLT surcharge, it’s evident that the government intends to encourage investors to think carefully about future acquisitions.
The Impact on Conveyancing and the Property Market
At PCS Legal, we are prepared to guide clients through the new fiscal landscape. However, the combination of higher stamp duty on second homes, the pending reduction in reliefs, and changes to CGT could lead to a slower market for buy-to-let and second homes in the long term. With landlords already facing a challenging tax environment, these new measures add another layer of financial caution.
For conveyancing firms, the increase in employer National Insurance contributions to 15 percent presents additional challenges. It will likely impact smaller firms most significantly, possibly limiting hiring and expansion plans.
The expiration of current SDLT reliefs, coupled with additional pressures on property investors and employers, could hinder growth in sectors like ours, which thrive on a robust and active property market.
At PCS Legal, our commitment is to keep clients informed and prepared for these changes, ensuring they are well-positioned to make the most informed decisions in a shifting fiscal landscape.