We’re all still digesting the headline figures from Labour’s first budget since coming to power and its plans to raise taxes by £40 billion to plug the £22 billion ‘black hole’ that the government has accused the Conservatives of leaving for them. But how do those plans impact the property market?
Stamp duty rises
The most immediate effect was the raising of stamp duty on purchases of second homes and buy-to-let properties, which rose from 3% to 5% the day after the Autumn Budget was announced. This increased cost could well deter investors and second-home buyers and will impact landlords looking to increase their portfolios.
Unmentioned stamp duty increases will impact other buyers too. Stamp duty thresholds had been temporarily frozen since September 2022 in an attempt to stimulate the market but are due to expire at the beginning of next April. The fact that they weren’t mentioned in the budget speech means that the thresholds will fall back, meaning that stamp duty will become due at lower rates from that point. Stamp duty on a main home will be due at £125,000 from April – half the rate it was before. The first-time buyer’s threshold will also drop back, down from £425,000 to £300,000.
Investment in affordable homes
The government has also increased its affordable homes budget, with an additional £500 million pledged. It will announce further investment in new affordable housing from social housing providers in phase 2 of its spending review which is due to complete in late spring next year.
Freedom to Buy mortgage guarantee scheme to become permanent
The government also plans to make the Freedom to Buy mortgage guarantee scheme a permanent fixture, ending what it says is a “stop-start availability” of the facility which supports lending at 95% and makes it easier for first-time buyers to get on the property ladder. It will also announce further details on this in late spring.
Increased affordability
The National Living Wage will increase to deliver an additional £1,400 a year to the annual pay packet of a full-time worker. It will see an increase for over-21s of 6.7% from £11.44 to £12.21 per hour from April. The move is expected to benefit more than three million low-paid workers across the UK and help with cost of living and affordability.
Wages for 18–20-year-olds will also increase, up from £8.60 to £10. This 16.3% rise will give an annual boost of more than £2,500 for nearly 200,000 young people across the UK.
The government confirmed that it would not increase basic, higher or additional rates of income tax, National Insurance contributions or VAT. It also revealed that the freeze to income tax and National Insurance contributions will end and personal tax thresholds will rise in line with inflation from April 2028. Fuel duty has also been frozen.
Stable inflation predictions
Inflation is also predicted to stay under control which should also help with longer-term affordability, particularly as interest rates fall. Inflation is predicted to average 2.5% this year, 2.6% next year and 2.3% in 2026. The Office for Budget Responsibility predicts that the UK economy will grow by 1.1% this year, 2% next year and 1.8% in 2026.
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