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Budget 2024: what this means for you

Writer's picture: Mortgage TreeMortgage Tree

It’s been a long wait and after months of speculation and rumour, the 'painful' budget is finally here. Here we unpack the changes and what it means for homeowners and those wanting to get onto the property ladder. Here's our summary of the major changes.

October 30, 2024


Budget 2024: what this means for you

The government has been warning for months that this budget will be ‘painful’ as it aims to plug a £22 billion black hole in public finances as well as raising money so the Chancellor Rachel Reeves can fulfil her promise to ‘invest, invest, invest’ in order to ‘fix public services’. We believe that housing should be a priority as everyone needs a safe, secure and affordable place to live. Here’s what’s in the budget and what you need to know. Plus, we outline the gaps in the budget and where we will continue to push for change. 


5000 extra new affordable homes

The Chancellor announced an extra £500 million to pay for 5,000 new affordable social homes. This will increase the affordable housing bill to £3.1 billion a year. The cash injection is desperately needed for housing associations to deliver their contribution to the government’s ambitious target of 1.5 million new homes over the next 4 years.  The new long term housing strategy for affordable housing due out in 2025 should give more clarity over how government intends to meet its longer term target. 

The government has also made it crystal clear that they want to see a substantial increase in the number of social rent homes delivered. This is likely to be at the detriment of the other types of affordable housing and in particular shared ownership and First Homes unless more money is made available. 


Stamp duty surcharge hike on second homes

The Chancellor announced an increase in the Stamp Duty Land Tax for those buying second homes, buy-to let and companies buying residential property from 3% to 5% from 31st October 2024. This move is seen as a way to prioritise those buying a home to live in – which we strongly support.

If the government really wants to support first time buyers then they should have also called for a extension of the stamp duty relief for first time buyers and to make the mortgage guarantee scheme permanent. You can read more about this below. In the meantime, those who are in the position to be able to buy their first home may want to get a move on if they can before April 2025.


Right to Buy Reform

The Chancellor hasn’t gone as far as to abolish the Right to Buy Scheme, but has changed the rules so that local authorities can plough 100% of the receipts from sales into new housing. Currently councils only have access to 50% of the money raised from sales, with the rest going to the Treasury.   

They are also looking to reduce the level of discounts,  increasing the length of time you need to have lived in the home in order to qualify and for the scheme to not apply to newly built council homes. 

The Right to Buy scheme has been a particularly good economic leveller for working-class people, giving them security for life with a roof over their head they otherwise wouldn’t have been able to afford. But it has also been abused when you hear that an estimated 41% of Right to Buy homes are now owned by private landlords, who rent them out at much higher rates and ironically back to the councils. 


Changes to inheritance tax

The Chancellor announced some changes to the inheritance tax system by applying the tax to unspent pension pots and to bring tax relief on agricultural property in line with the inheritance tax limits. As it stands, you’ll continue to pay inheritance tax at 40% on an estate on everything above the tax-free inheritance tax allowance of £325,000. However, only about 4% of estates need to pay inheritance tax, according to HMRC. This is because there is no inheritance tax payable when inheriting from a dead spouse or civil partner and you will also inherit your spouse’s unused nil-rate band. Plus, providing you leave your home to direct descendants there’s an additional property allowance of £175,000 each. This gives the maximum combined allowance of £1,000,000.

The current inheritance tax thresholds are due to be frozen until April 2028, and the government is extending these threshold freezes for a further two years to April 2030.


Capital Gains Tax changes

With Labour pledging not to increase Income Tax, National Insurance paid by employees or VAT, Capital Gains Tax (CGT) has been hiked for employers, business owners and shareholders in the 2024 Budget. Capital gains tax is charged on profits you make from selling an asset like a second property or shares.

There is some good news for buy to let investors and second homeowners that the capital gains tax due on the sale of their property will remain unchanged at either 18% or 24%, depending on whether you are a basic or higher rate tax payer. Read our guide on Capital gains tax on property when selling.

However, many landlords have already started selling Buy to Let properties due to increased regulation, high mortgage rates and other unfavourable tax changes.  As a result, Buy-to-let fixed rates have fallen to their lowest since the start of September 2022, according to the latest analysis by Moneyfacts.


First time buyer stamp duty relief won’t be extended

The threshold for paying first-time buyer stamp duty was increased from £300,000 to £425,000 in September 2022. But this benefit for first time buyers was only announced as a temporary measure and is set to be reversed in April 2025. Ahead of winning the 2024 general election, Labour said that if they won, the first-time buyer relief would revert to £300,000.

It’s disappointing that the budget made no mention of extending this relief to help first time buyers. Therefore, first time buyers currently in the process of buying will need to act fast to avoid paying more in stamp duty. If the stamp duty relief is cut, it will make it even harder for people to buy their first home. We will continue to call on government to scrap stamp duty altogether.



What wasn’t in the budget 2024?

  • Freedom to Buy: Ahead of the general election, Labour pledged to launch the Freedom to Buy scheme which would offer a permanent mortgage guarantee scheme. But the only details released in the Budget 2024 is that they will be engaging with industry over the autumn. They aim to make it permanently available to support lending at 95%, ending the stop-start availability of the scheme and giving lenders confidence throughout the cycle, while making it easier for first-time buyers to realise the dream of home ownership.

  • Lifetime ISA: Updating the Lifetime ISA scheme would be a big help for first time buyers. By removing the outdated 6.25% LISA withdrawal fine for people buying a home above the current £450,000 price limit – a threshold that hasn’t changed since 2017 – more people would have confidence to save into the scheme. The government needs to find a way to make sure these schemes keep up with house price reality and people wanting to use their savings to buy a home aren’t penalised.

  • Rent a Room: Under the current scheme homeowners can rent out a room in their home, helping them afford soaring mortgage payments. We successfully campaigned in 2015 to get the Rent a Room Relief increased so that £7,500 of any income is tax-free. But this figure hasn’t been revised since then.

  • Better energy efficiency grants to fill the winter fuel allowance void: Our research shows more than one third of homeowners (36%) have been held back from making energy efficiency improvements to their homes due to cost and 18% said the savings may not justify the up-front cost. More support is needed to help people keep their homes warm.


Article from HomeOwners Alliance

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