From Stamp Duty to Capital Gains Tax, Rachel Reeves’ first Budget delivered some controversial changes. Read our full analysis below for what this means for landlords and property investors.
Today, we finally got the full details of Labour’s highly-anticipated October Budget. Following weeks of rumours and speculation over what tax changes Rachel Reeves’ would implement, what new challenges do landlords and property investors have to navigate?
Below, we’ll cover Reeves’ key announcements for property investors, including:
- The Stamp Duty surcharge hike
- Capital Gains Tax increases
- Inheritance Tax thresholds
Stamp Duty Land Tax (SDLT) Increases to 5%
In a surprise announcement, Reeves increased the SDLT surcharge on second homes and residential investment property from 3% to 5%, coming into effect from tomorrow (31st October 2024). This gives landlords and property investors no time to act in light of these changes.
In a further blow, Reeve’s failed to extend the temporary Stamp Duty threshold reductions which will reset from 31st March 2025. This will see the 0% threshold reduce from £250,000 back to £125,000.
If these measures were meant to benefit first-time buyers (FTBs), they won’t. The FTB 0% threshold will also decrease from £425,000 back to £300,000 in March 2025. This means that people wanting to get onto the property ladder for the first time will face higher costs, and therefore need to rely on rental properties for even longer.
However, the surcharge increase on second homes and residential investment property penalises landlords, and disincentivises them from providing much needed rental housing.
The dreaded Capital Gains Tax (CGT) rise
In more positive news, the Chancellor opted to keep the current CGT rates on property at 18% and 24%. However, Reeves did increase the rates of CGT for shares and other assets from 10% to 18% for lower-rate taxpayers, and 20% to 24% for higher-rate payers.
Reeve’s said that this would raise an additional £2.5 billion to fund public services.
Inheritance tax changes
The £350,000 inheritance tax (IHT) threshold freeze set in place by the Conservative government has been extended for another two years until 2030. Reeves plans also involve closing the “loophole” her predecessors set in place by bringing inherited pensions into inheritance tax from 2027.
Freeze on Income Tax Thresholds
Reeves announced she won’t extend the freeze on Income Tax thresholds as part of her plans to keep taxes down for working people. The thresholds will begin to rise again in line with inflation from 2028, preventing a fiscal drag of more people paying tax, and at a higher rate.
Business Rates
The temporary 75% relief on business rates was due to expire in April 2025. However, Labour have opted to partially reduce this relief to 40%, softening the blow for retail, hospitality and leisure businesses. This is capped at £110,000 per business until 2026.
Fuel and Alcohol duty
Given the ongoing high cost of living and global insecurity, Reeves announced that Fuel Duty will be frozen once again until next year to help keep living costs down.
Furthermore, the Chancellor announced plans to cut draught duty by 1.7%, which should help better support pubs and commercial property investors in the hospitality industry.
An increase on employer’s national insurance contributions
Alongside the announcements of a higher National Minimum Wage, no increases to Income Tax, employee National Insurance (NI), or VAT, Reeves turned to businesses to make up the shortfall in taxes. Today’s Budget announces that from April 2025, employer’s NI contributions will rise by 1.2% to 15%. Furthermore, the threshold at which employers start making NI contributions will decrease from £9,100 to £5,000.
However, measures were announced to protect and support small businesses. The Employment Allowance will increase from £5,000 to £10,500, meaning 865,000 employers won’t pay any national insurance next year.
These changes were rumoured prior to today’s announcement and, despite the government’s attempt to support businesses, the consensus is the extra costs for employers will gradually be passed to staff in some form, such as lower pay and fewer job benefits.
A £500m Boost for Building 5,000 social homes
Reeves has confirmed she will release an extra £500 million to build up to 5,000 social homes, with more homes to come alongside “protections” for social housing stock. This will top up the Affordable Homes Programme and protected by reducing Right to Buy discounts so that more council homes remain in the sector.
This is part of a £5 billion investment in housing, aiming to “get Britain building again” and make good on the manifesto pledge to build 1.5 million homes. Additionally, Reeve’s pledged £3 billion to support small house builders and a recruitment drive on planning officers.
Keep up to date with the consequences of Reeves’ Budget
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