What Rachel Reeves’s Budget really means for the housing market

The higher tax bill will likely discourage new landlords from entering the market and existing landlords from expanding their portfolios, warns Richard Davies, MD of London estate agency Chestertons

‘We will see fewer new rental properties coming to the market, creating a more competitive environment for tenants’ (PA)

Rachel Reeves’s measures in the Budget will undoubtedly have an impact on homeowners, aspiring buyers and landlords – but there were probably fewer drastic changes than many people anticipated.

In a move that directly targets landlords and wealthier homeowners, the chancellor confirmed that stamp duty for second homes will increase from 3 per cent to 5 per cent from 31 October 2024. This was a move that had been widely anticipated and the majority of second-home buyers and investors have already built this into their calculations, so we don’t expect this increase to deter them from proceeding with their purchase.

However, the higher tax bill will likely discourage new landlords from entering the market and existing landlords from expanding their portfolios of rental properties. This means that we will see fewer new rental properties coming to the market, creating a more competitive environment for tenants.

On a more positive note, the chancellor announced there will be no increase to capital gains tax (CGT) on the sale of second homes, meaning the rates on residential property will remain at 18 per cent and 24 per cent. This is welcome news for second homeowners and landlords who are considering selling their rental investments and second homes to fund retirements or to buy larger primary residences.

Before the Budget, there were concerns that a drastic increase in CGT on residential would cause second homeowners to rush to offload their properties before the tax came into effect, which could have caused a sharp drop in property prices in some areas of the country, but this situation has been averted.

First-time buyers will be frustrated with the chancellor’s decision to not retain the £425,000 stamp duty threshold, which was previously temporarily increased from £300,000, but will now return to the lower figures at the end of March next year.

Ultimately, this will mean that more first-time buyers in expensive areas of the country like London will need to pay stamp duty, which will require them to save for longer. This will inevitably lead to more people needing to rent for longer, but will also encourage many to broaden their search radius and consider buying in areas they hadn’t previously looked at.

Last but not least, our trusted partners at wealth, accountancy and business advisory Evelyn Partners flagged that changes have also been announced to inheritance tax, which will leave many homeowners feeling frustrated. To date, individuals have been allocated a tax-free inheritance tax nil rate band of £325,000 or £650,000 for a married couple in addition to a residence nil rate band of £175,000 or £350,000 for a married couple.

These reliefs have been extended to April 2030, which will be welcome but likely mean many taxpayers need to look at insuring against the inheritance tax liability due to arise thereafter. This will be labelled particularly negative news by those living in areas or cities such as London, where property prices tend to be higher than the UK average.

Pensions will also now be brought into taxpayers’ estates on death from April 2027. No mention was made about the capital gains uplift on death, but agricultural property relief and business relief will be reduced from April 2026 with a new lifetime cap of £1m and an effective rate above that of 20 per cent.

Buyers, investors, tenants and landlords will now need to take a moment to carefully review the changes introduced via the autumn Budget and work out how they will impact their individual situation. If in doubt, we recommend reaching out to your trusted estate agent, or tax and wealth advisors who will be able to provide additional guidance and support.

Richard Davies is managing director of London estate agency Chestertons