Spring Budget 2024

Jeremy Hunt’s Spring Budget 2024 has not had the impactful effect on the property industry that many had hoped for.

The Chancellor’s announcement in the House of Commons yesterday, was anticipated to introduce new schemes to help first time buyers get their foot on the property ladder.

He promised that “building homes for young people” is a priority in his speech. However, those hoping for the much talked about 99% mortgage scheme and Stamp Duty relief, or a lifetime ISA penalty repeal, were likely to be very disappointed.

Stamp Duty Land Tax

Rather than relief from Stamp Duty, the Government instead promised to abolish a certain Stamp Duty tax.

The Multiple Dwellings Relief was initially introduced for those buying more than one house in a single transaction. This initiative has now been taken away.

Key members from the property industry have expressed their disappointment in the Government’s missed opportunity to help downsizers (who could free up larger homes) and first-time buyers.

Tim Bannister, Rightmove's property expert added: "We had hoped the Government would seize the opportunity to help first-time buyers and reform the outdated stamp duty system, instead, home-movers are left with very little. “There is a chance that the reduction in the higher rate of Capital Gains Tax will mean some landlords to sell properties which could, in turn, increase choice for first-time buyers. Whilst any increase in supply for first-time buyers is welcome, we will have to wait to see how substantial it is, and it may also result in a further reduction in already-tight rental stock levels in the short term."

Non-Dom tax status scrapped

The Chancellor is also planning to replace the current tax regime for non-domiciled people who live in the UK and pay tax on UK earnings, while still maintaining a main home overseas. The move is one that may cause concern in London's prime property sector, where they rely on overseas investment to sell some of the Capital's most expensive homes.

From April 2025, new arrivals won't be asked to pay tax on foreign income for four years. However, if they continue to live here, they will have to pay the same tax as other UK residents. Hunt called it "a more generous regime than at present and one of the most attractive offers in Europe" and estimated it would raise £2.7 billion for the UK economy.

Capital Gains Tax

Another announcement was that the higher rate of property Capital Gains Tax will be reduced from 28% to 24%.

Capital Gains Tax is paid on the profit made by the value gained by an asset — when you sell it – for example, a house.

Hunt said the Treasury and the Office for Budget Responsibility “have concluded that if we reduced the higher 28% rate that exists for residential property, we would in fact increase revenues because there would be more transactions” and so would go ahead with the 4% tax cut.

Although welcome in some quarters, others in the property industry were more sceptical.

“Is there going to be a flurry of sales from landlords because they will make a saving on Capital Gains Tax? No, they are in it for long-term gain, capital appreciation combined with income yield,” said Mark Harris, Chief Executive of mortgage broker SPF Private Clients.

Despite that yield being hit hard with higher interest rates and more regulation, as well as the inability to offset mortgage interest, professional landlords are very committed and not expected to start selling their property portfolios because of a slight reduction in Capital Gains Tax.

Crackdown on short-term rentals

The Chancellor used the budget to address growing concerns surrounding the lack of available properties for long-term rentals, because of the increasing number of homes being let to tourists for one or two nights at a time.

The Furnished Holiday Lettings Tax regime "is creating a distortion meaning that there are not enough properties available for long term rental by local people" he said in the budget. The current laws in existence allow landlords to deduct the full cost of mortgage interest payments from their rental income and to pay lower Capital Gains Tax if they sold the property. "To make the tax system work better for local communities, I am going to abolish the Furnished Holiday Lettings regime.”

Scrapping this will raise £300m, says Hunt. There are an estimated 12,000 short-term lets in Westminster, making it the most saturated area in the country for rentals, which is why the council have been campaigning for this change.

Lifetime ISA cap unchanged

Another unfulfilled hope was that the Lifetime ISA (LISA) cap for First-Time buyers be lifted.

The money saving expert Martin Lewis, has been publicly campaigning to remove the penalty and he said the Chancellor had told him why it wasn't included in this budget.

"I wanted to do a big home ownership package but that doesn’t work until property prices are definitely rising and I still have to keep an eye on overall borrowing," Hunt told Lewis.

"I want to do more than remove the penalty. I want to reform LISAs."

Currently people can save up to £4,000 a year and receive a £1,000 top-up from the Government, plus interest. However, it can only be withdrawn to pay for a first home costing less than £450,000. Otherwise there's a 25% penalty.

For those looking to get on the London property ladder, where the average home costs well above that limit, the LISA probably isn’t as helpful as in other parts of the country when it comes to saving for a deposit.

No 99% mortgage

It had been widely expected that the Chancellor was going to announce a Government backed 99% mortgage scheme, which would’ve been seen as a welcome initiative by some. Typically aimed at first-time buyers, the scheme would allow people to put down a deposit of just 1% when buying a house.

Cut in National Insurance

The Government is cutting the main rate of employee National Insurance by 2p from 10% to 8%, from 6th April 2024.

Craig Vile, Director of The ValPal Network suggested this announcement could be beneficial to the property market and said: “It will help some first-time buyers overcome lender affordability criteria.

“With inflation coming down and the prospect of lower interest rates to come, we may well see greater confidence in the market and some of that pent up demand begin to flow through.

“Aside from any specific measures to drive transactions, the outlook for the economy is brighter and that should give us all some optimism as we head into the Spring.”