The Chancellor's Budget: What to Expect

Posted by Strettons on 11th November 2024 -

The Chancellor's latest Budget introduced several significant changes, updates, and forecasts across key areas in the UK, including growth, property tax policies, business rates, inheritance tax, and housing investments.

This brief provides an overview of the Office of Budget Responsibility's (OBR) projected economic growth, notable adjustments to Stamp Duty and Capital Gains Tax, and critical measures affecting the housing and business sectors. 

With these changes, the Budget aims to balance immediate fiscal needs with long-term economic stability. However, the impact on inflation, interest rates, and property markets has yet to be determined. 

Here are the key takeaways from the announcement:

 

Growth

• The Chancellor shared projections from the Office of Budget Responsibility (OBR) which said that real GDP growth will be 1.1% in 2024, 2% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028 and 1.6% in 2029. Against previous predictions, this represents short-term growth that turns into a modest negative impact by the end of the parliament. 
• The OBR has commented that in the short term the Budget would push up inflation and interest rates, with a knock-on effect on growth. 

Stamp Duty

• Stamp Duty charge for those buying second homes, for example, a landlord buying properties to let, is set to rise from 3% to 5% from 31 October 2024. 
• Stamp Duty thresholds were adjusted until March 2025, however, there were no mention of an extension to these thresholds in the Budget which has an impact on first-time buyers and home-movers. Currently for first-time buyers they do not pay Stamp Duty on the first £425,000 and home-movers do not pay Stamp Duty on the first £250,000. With adjustments to thresholds, these rates will fall to £300,000 for first-time buyers and £125,000 for home-movers. 
• These Stamp Duty adjustments may affect property prices, especially with the changes after March 2025. 

Capital Gains Tax

• What is paid in CGT will depend on an investor's personal income tax rate. 
• The main rates of capital gains tax (CGT) for non-residential property have been increased to 18% for basic rate taxpayers and 24% for higher rate taxpayers (from 10% and 20% respectively). They are now aligned with the rates applying to disposals of residential property. The new rates apply to transactions completing on or after 30 October 2024. 
• Whilst there were anticipated changes to Capital Gains Tax, the Budget confirmed that the current rates of Capital Gains Tax on residential property will remain unchanged, which already has 18% and 24% rates. 

Business Rates

• Business rates relief will fall from the current 75% down to 45% for retail, leisure, and hospitality businesses. 
• The maximum amount of the relief is £110,000 per business.

Inheritance Tax

• The Chancellor announced that Inheritance Tax thresholds will remain frozen for a further two years to 2030. This means that the first £325,000 of any estate can be inherited tax-free, and £500,000 if the estate includes a residence passed to a direct descendant, and £1 million if the estate is passed to a spouse or civil partner. 
• Inherited Pensions will be brought into Inheritance Tax from April 2027. 

Housing

• The Government will invest more than £5 billion to deliver their new housing plan with the Labour administration’s target of 1.5 million new homes over the next five years.
• The 'right-to-buy' discount on people buying their council properties will fall and councils will be allowed to keep the full amount from sales. 
• An extra £500m will be ploughed into the Affordable Homes Programme (AHP) to keep development going until 2026. £500m for the AHP will only translate into 5,000 new affordable homes. That is just 0.3% of the government's target to build 1.5 million homes in five years. 
• £50m will go into planning departments to help recruit 300 new planners, which is only about 1 planner per local planning authority. The Government has also promised to respond to the National Planning Policy Framework consultation before the end of the year.
• 5-year rent settlement of the Consumer Price Index (CPI) plus 1% for social housing providers. 
• Further information on housing will be provided in the Spring 2025 spending review. 

Non-Domicile 

• Non-domicile tax regime will be abolished from April 2025 and a new system will be introduced for those coming to the U.K. on a temporary basis. 

 

In summary, the Budget's diverse measures bring both opportunities and challenges for individuals, investors, and businesses across the UK. From slight upticks in economic growth projections to adjustments in taxes and support for housing development, these policies reflect a concerted effort to address key fiscal areas while acknowledging the complexities of the current economic landscape.

As some of the initiatives will be outlined with further details and reviewed in the future, we advise all our clients to stay informed and prepare for any potential implications or impacts these policies will have in the next few years.