Overview of the Autumn Budget 2024

The Autumn Budget 2024, delivered by Chancellor Rachel Reeves, presents a multi-faceted approach to economic reform, aiming to increase fiscal responsibility, encourage growth, and support essential public services. For landlords and property investors, this budget introduces impactful changes, especially through adjustments in stamp duty and tax relief on inheritance, which may affect investment strategies and the property market at large.

1.   Increased Tax on Capital Gains and Second Homes:

The budget introduces an increase in Capital Gains Tax (CGT) for certain assets, impacting high earners and investors. Stamp duty on second homes will rise from 3% to 5%, a measure expected to deter buy-to-let investments. This increase is likely to reduce competition in the housing market, which may benefit first-time buyers. However, the limited supply of rental properties could drive up rents, adding pressure on the private rented sector   .

 2.   Employer National Insurance (NI) Changes:

Employer NI contributions will rise from 13.8% to 15% by April 2025, with a reduced threshold of £5,000. This adjustment, intended to generate revenue, may influence hiring practices and wage growth, especially among smaller businesses. An increase in the employment allowance is intended to relieve some pressure on SMEs  .

3.   Household Incomes and Inflation:

With inflation beginning to stabilise, household disposable income may see modest improvement, though the income tax threshold freeze could limit these gains. This fiscal approach aims to maintain purchasing power while preventing inflation from rising  .

4.   Focus on Economic Growth and Investment:

Emphasising growth, Labour has introduced fiscal rules that allow borrowing for targeted investment in green energy, technology, and infrastructure, sectors expected to stimulate employment. Reforms in public services aim to improve efficiency and address long-standing funding issues  .

5.   Public Services and Spending:

Labour has committed to improving public services, with an emphasis on healthcare and education. The revised fiscal rules allow for essential infrastructure investments, supporting Labour’s goal to address public service deficiencies while maintaining fiscal prudence  .

Inheritance Tax Reforms

Inheritance tax (IHT) reforms in the Budget freeze the tax-free threshold at £325,000 until 2030, and estates exceeding this threshold will still face a 40% tax rate. From April 2027, inherited pensions will be subject to IHT, a shift that may affect wealthier estates.

Further adjustments include changes in relief for business and agricultural assets starting in April 2026. The first £1 million will be exempt, while assets above this limit will incur a 20% IHT rate, with a 50% relief, balancing government revenue needs with support for family businesses   .

Impact on Landlords

The increased stamp duty on second homes to 5% is a notable change impacting landlords, particularly those in the buy-to-let sector. This higher rate is likely to discourage further buy-to-let investments, potentially tightening rental supply and leading to rent increases. The rise in CGT rates also affects landlords looking to sell investment properties, potentially causing some to hold onto properties longer to avoid higher tax costs. These changes reflect Labour’s aim to rebalance the housing market by shifting advantages away from buy-to-let investors and supporting prospective homeowners.

Additionally, the IHT adjustments may affect landlords with significant property portfolios who intend to pass these on as inheritance. The new IHT rules for pensions, business, and agricultural assets create a more complex inheritance landscape, requiring landlords to reassess estate planning strategies to minimise tax exposure on their holdings  .

The Autumn Budget 2024 showcases Labour’s approach to fostering growth while managing fiscal constraints. Tax changes affecting landlords, such as the stamp duty increase and CGT adjustments, could reshape investment patterns in the property market. Meanwhile, public service investments and policies targeting essential services aim to stabilise and support the wider economy, particularly in sectors facing critical demand. The long-term effectiveness of these measures will depend on their impact on economic growth, inflation, and public services in the years to come   .