Labour will deliver its first Budget at the end of this month, with Chancellor Rachel Reeves expected to set out a number of tax policy changes and spending shifts.
There is already much speculation over what might appear in the Budget, which will be read out on 30th October 2024, four months after Labour came into power. Reducing the country’s debt and driving growth are of course top of the agenda, but it remains to be seen how this could be achieved.
At the same time, Prime Minister Keir Starmer has hinted at the potential to increase public spending, after reiterating his view that “borrowing to invest” can act as a “catalyst” for private investment, in comments made to Channel 4 News.
While the party has reassured the public that there will be “no austerity”, the Chancellor has alluded to some “tough decisions” that must be made to get the economy and services back on track.
When it comes to the housing market, there are some changes afoot that had already been set in motion when the Conservatives were in power – so it seems unlikely there will be any unwelcome surprises when the Budget is announced in a few weeks.
Capital gains tax
Under the Tories, the capital gains tax threshold has already been reduced, meaning a higher level of the tax is already being paid on the profits of the sale of any investment property.
In April this year, the capital gains tax annual exempt amount reduced from £6,000 to £3,000. This has been gradually reduced since the 2022/2023 tax year, when it was £12,300.
At the same time, the higher rate of capital gains tax on gains from residential property was reduced from 28% to 24% on gains accrued on or after 6th April 2024. If the size of your gain falls within the basic income tax band, the rate is 18%, which is unchanged from previous rules.
While there are rumours circulating the Labour could hike capital gains tax in order to help fill the £22bn “black hole”, Rachel Reeves has said previously that she has no plans to increase it in the Budget.
She told BBC Radio 4: “There are people who have built up their own businesses who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve reinvested in their business, but this is their retirement pot of money.”
Non-dom tax status
Initially, Labour had said they would “crack down” on non-doms – the term used to describe a UK resident whose permanent home (or domicile) for tax purposes is outside the UK. In its manifesto, the party had vowed to tighten the rules on where tax is paid, in order to bring in more money for the Treasury.
While this is still largely subject to change for the Budget, Labour is now said to be reconsidering these changes due to the fact that it could in fact bring in less money than expected. There is also the concern that wealthy non-doms could leave the UK, removing the benefits they bring to the economy.
Commenting on this, a Treasury spokesperson said: “These reports are speculation, not government policy. The independent Office for Budget Responsibility (OBR) will certify the costings of all measures announced at the Budget in the usual way.”
Further to this, a government official told the Financial Times: “We are looking at the details of our proposals. We will be pragmatic, not ideological. We won’t press on regardless, but we are not going to abandon this completely.”
Foreign investment in the UK property market is extremely popular due to the country’s strong economy, and resilient housing market, with prices increasing over the long term. Overseas investors already pay a stamp duty surcharge of 2% when buying property in the UK.
Will stamp duty come up in the Budget?
This is a continuously circulating rumour, largely due to the number of industry bodies and individuals who have made calls over the years for stamp duty to be reassessed in a number of ways.
At the moment, the higher threshold of stamp duty for first-time buyers of £425,000, which came into play in September 2022, is set to be reversed next April, as it was only ever intended as a temporary measure. However, speculation is rife that Labour could look at this again in its Budget.
It could, too, overhaul the wider stamp duty tax system, perhaps changing thresholds or tax rates in order to stimulate the housing market.
The Homeowners Alliance is one industry body that is calling for the government to scrap stamp duty completely in its autumn Budget.
It said: “Stamp duty is a tax on homeownership that’s a major obstacle to the housing market functioning properly. It puts off families from moving up the property ladder, fleeces homeowners needing to make a sideways move and makes it more expensive for older generations to downsize.”
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