Fixing foundations, delivering change and rebuilding Britain – all phrases associated with the Labour 2024 Budget, but what do these mean for the property sector?

The UK 2024 Budget has introduced a series of measures that are poised to significantly impact the property sector. As the housing market continues to be a cornerstone of the nation’s economy, the Budget’s provisions aim to address various challenges, from affordability and supply constraints to climate-related upgrades and digital transformation.

I spoke to the property sector team at Shaw Gibbs to draw out their thoughts on the key aspects of the Budget and the potential repercussions for property developers, investors, homeowners, and renters.

Housing supply and affordability

One of the pivotal elements of the 2024 Budget is the government’s renewed commitment to increasing housing supply. The Budget supports greater investment in the construction of new affordable homes, with a focus on urban regeneration and brownfield site development.

The headline announcement from a tax perspective which took effect immediately on 30 October 2024 is the increase in Capital Gains Tax (CGT) rates to 18% for basic rate taxpayers and 24% for higher rate taxpayers. This brings the rate in line with the amount charged on residential properties, meaning there is no longer a differential in the rates between commercial property, land, shares etc and residential property.

The withdrawal of the Furnished Holiday Let (FHL) regime which was originally introduced by the Conservative Government has now been confirmed with effect from 6 April 2025, meaning that income arising from short term holiday lettings will form part of other property income, and the previously available CGT benefits will no longer be available from this date.  In addition, income tax benefits such as the full deductibility of mortgage interest will also be withdrawn. Income from FHLs remains subject to the standard rate of VAT and is unaffected by this change in legislation.

From 31 October 2024 the Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax (SDLT) will be increased from 3% to 5% so that individuals moving home or taking their first step on the property ladder have an advantage. This increase also puts the potential top rate of SDLT for a non-UK resident ‘non-natural person’ (broadly a non-UK corporate entity) buying residential property with a value of more than £500,000 to a flat rate of 17%.

All of these measures have clearly been put in place to increase the tax coffers into UK PLC but could also be an attempt to address the ‘second homers’ phenomenon which is well documented as pushing locals out of a number of desirable UK locations due to the price of housing stock.

Leo Donovan, Associate Director for VAT and lead of the Shaw Gibbs property sector group said

“It generally feels like they’re simply trying to free up housing stock. Basically, they don’t want property sitting there empty for possibly second homers. But let’s be honest, those of a certain wealth and means probably won’t be too impacted other than paying a bit more tax”

Vinay Bahl, Audit Manager adds

“I network regularly with property professionals and there seems to be an even split between landlords putting their properties on the market and exiting the industry altogether and those who are happy to weather the storm of an increased tax and regulation burden.

It is interesting to think what will happen to property prices as a result of the tax changes. Initial conversations I have had with people in the industry indicate prices may increase as ultimately individuals will still want to recoup a sufficient return after the impact of the rising tax burden.

It is a shame that landlords with smaller portfolios of say, three or four properties may feel the squeeze more heavily and therefore decide to sell but I cannot see this housing stock being back in circulation as making a huge difference. It is my opinion that the rent control and anti-eviction laws may in fact have more of an impact than the tax hikes.”

Making Tax Digital

Let’s not forget the ever-changing implementation date of Making Tax Digital (MTD) for landlords and sole traders. This is now to come into force in April 2026 and will apply to landlords or landowners who have gross property income of more than £50,000, falling to £30,000 from April 2027. We understand that this is pretty much set-in-stone as all political parties have agreed to this measure. I have many clients who I can see falling straight into MTD from April 2026 and despite the prolonged delays in the launch of this, it will still be an additional administrative burden and shock to the system for some. Rest assured, the team at Shaw Gibbs is working proactively to provide a solution for clients to ease the pain of reporting under MTD when it does arrive.

Commercial property

Danielle Dixon, an Audit and Accounts Manager who deals with the leading membership body for property agents notes that the High Street could be the biggest victim of the changes in the budget, notably retailers who have already been struggling are now also facing a reduction in the business rate relief.

“It has been said that the reduction to the business rate relief  from 75% to 40% could potentially nearly double the operational costs of a retailer, something that the independent trader on the High Street will find hard to shoulder and will lead to more empty shops on the High Street.”

The UK 2024 Budget presents a multifaceted approach to addressing the challenges and opportunities within the property sector. By focusing on housing supply, affordability, sustainability, digital transformation, and investment, the government aims to create a more resilient and equitable property market. While some measures may pose challenges for certain stakeholders, the overall direction of the Budget seeks to foster long-term growth and stability in the sector.

The property sector will undoubtedly need to adapt to these changes, but the potential benefits of increased housing availability, enhanced energy efficiency, and streamlined processes are promising. As the Budget’s provisions unfold, stakeholders must stay informed and agile to navigate the evolving landscape of the market.