Rachel Reeves Announces Tax Rises of £40 Billion in Autumn Budget

The Chancellor Rachel Reeves announced the first budget by a Labour government in 14 years today (30 October 2024). The budget contained a wealth of changes that will affect millions of people across the country.

With Reeves claiming she was left with a £22 billion black hole in the public finances following the last Conservative government, it was inevitable a raft of changes were to be announced.

The budget was extensive, with changes impacting first-time buyers and homeowners alike. With Reeves declaring there would be no return to austerity, £40 billion worth of tax rises, including changes to Capital Gains Tax and Inheritance Tax, were announced.

Whether the changes announced by the Chancellor will see a return to economic growth remains to be seen. But they are an ambitious set of changes that present a sharp contrast to economic policies under the Conservatives.

Below, we look at the changes announced in the budget and what they could mean for people looking to get on the property ladder and those already on it.

Stamp Duty

One of the biggest changes announced by the Chancellor in the budget related to housing was the announcement of a rise in Stamp Duty Land Tax surcharge in England and Northern Ireland. (Scotland and Wales have their own versions of Stamp Duty).

The change only applies to those purchasing second homes and will increase the surcharge from 3% to 5% effective from the 31st October 2024.

At the last Census, it was estimated there were 1.5 million second homes unoccupied in England, which accounted for 6.1% of all homes in the country. The figure was 120,450 in Wales, representing 8.2% of all homes in Wales.

The change will make purchasing a second home more expensive and could put off potential buyers. In turn, this could benefit first-time buyers, as homes that may have been bought as second homes could now be available to those looking to get onto the property ladder.

The change could also make landlords more reluctant to purchase buy-to-let properties. The knock-on effect of this could be that the supply of rental homes is squeezed, which may lead to an increase in rent for existing tenants.

More houses

As we noted in the run-up to the election and after Labour won, the new government has an ambitious plan to build 1.5 million new homes by the end of the five-year Parliament.

The Chancellor confirmed this by announcing a housing package worth £500 million, which will provide 5,000 new social houses. The existing stock of social houses will also be protected by reducing the discount on the Right to Buy scheme.

Councils will also retain the earnings from council house sales, which they will be able to reinvest. These changes are part of the one central planks of Labour’s manifesto pledge to build 1.5 million homes.

The reduction of the Right to Buy discount will disappoint many looking to buy their council house. However, the announcement of the £500 million package, which includes ambitious plans such as a £56 million investment at Liverpool Central Docks, will provide 2,000 new homes as well as retail, leisure and hospitality facilities.

There was also an announcement that the government will hire hundreds of new planning officers to speed up housebuilding. This should be welcome news to people looking to get on the property ladder, especially if they’ve been renting for a long time.

Of course, these are just announcements, and whether they result in the 1.5 million homes the government wants to build remains to be seen.

Other changes

While there was an increase in Capital Gains Tax, with the lower rate rising from 10% to 18% and the higher rate rising from 20% to 24%, there was no change in the 24% rate imposed on second properties.

This will please those looking to sell their second homes in the coming months, as they won’t be hit by further taxes.

Reeves also announced an increase in the national living wage for over 21s, which will increase from £11.44 to £12.21 an hour from April 2025. The rate for 18 to 20-year-olds will also increase from £8.60 to £10. This gives young people an opportunity to save more money to put towards a deposit on their first home.

One thing many people will want to know is whether the interest rate on their mortgages will increase as a result of the measures announced by the Chancellor.

The Office For Budget Responsibility (OBR) estimates that inflation will average 2.5% this year, 2.6% next year, then fall to 2.3% in 2026. This could mean the Bank of England will be more reluctant to lower the base rate in case inflation rises beyond these estimates.

For those on tracker mortgages or who’s fixed-rate is coming to an end soon and need to remortgage, this news will be a blow. Mortgage rates will likely remain in the same ballpark for the foreseeable future unless inflation drops more than the OBR estimates.