UK Autumn Budget 2024 and the potential impact on property investors?
The UK’s Autumn Budget for 2024 was presented yesterday and it introduced critical changes to taxes and policies that directly and indirectly impact property investors
From Capital Gains Tax increases to the end of the non-dom tax regime, these adjustments could influence investment strategies and returns. Below, we have provided a summary of the new measures, their implications and practical steps to help investors safeguard their investments, highlighting why auction properties may present an attractive opportunity for investing and divesting land or property.
Stamp Duty Hike on Buy-to-Let and Second Homes
This tax has increased from 3% to 5%, raising the entry cost for new landlords and those looking to expand their portfolios. This measure aims to reduce speculative investments and curb new entrants.
What You Can Do
Strategic Financial Planning: Assess the long-term value of any buy-to-let purchases and ensure they offer a sufficient return to cover the additional tax costs.
Focus on High-Demand Rental Areas: To secure consistent income, priority locations with strong rental demand, such as Manchester and Leeds, should be prioritised.
Why Use Property Auctions?
Auctions are an excellent way to discover high-demand properties at competitive prices. All our auction listings offer opportunities to buy-to-let in popular rental locations.
The Abolition of the Non-Dom Tax Regime
From 2025, the non-domiciled (non-dom) tax regime, which currently allows high-net-worth individuals to limit tax on overseas income, will be abolished. This change will require those previously benefiting from the government to pay tax on their global income.
What You Can Do:
Reassess Your Existing Portfolio Viability: Non-dom investors should consult tax advisers to evaluate the continued viability of UK property holdings under the new tax rules.
Consider Restructuring: Investors who plan to stay in the UK might need to restructure their portfolios to effectively manage future tax liabilities.
Why Auctions?
If you are considering restructuring or selling properties due to the tax changes, auction sales offer a straightforward and efficient process, especially for high-value properties that attract global investors.
As all our auctions are livestream events, our data tells us that investors from across the globe participate in them.
Inheritance Tax (IHT) Adjustments
The budget has extended the freeze on Inheritance Tax thresholds until 2030. While properties up to £325,000 (or £1 million for married couples with direct descendants) remain tax-free, estates above these limits will continue to incur tax at standard rates.
What You Can Do
Review Your Estate Planning: Trust arrangements or lifetime gifts are potential tax-efficient ways to transfer property assets. It is highly recommended that you consult a financial planner to explore other strategies.
Employer National Insurance Changes and Indirect Impact
While not directly tied to property, the 1.2% increase in employers’ National Insurance contributions could impact cash flow for those with corporate property ownership structures.
What You Can Do
Review Corporate Structures: Investors using corporate structures should evaluate their business models to find tax-efficient methods to offset the rise in payroll taxes.
Capital Gains Tax (CGT) Increases
One of the most notable changes is the rise in Capital Gains Tax rates. Basic-rate taxpayers will see an increase from 10% to 18%, while higher-rate taxpayers will face a rise from 20% to 24%. While the gains on property CGT remain the same, there is always an indirect correlation with the share of wallet when personal tax increases.
What You Can Do
Consider Holding Assets: Investors may decide to hold onto properties longer, allowing for capital growth that could outpaces CGT hikes.
Explore Tax-Efficient Reinvestment: Investors can investigate tax-efficient opportunities or strategies, such as using CGT allowances to offset the impact of the personal increases. Consult a tax advisor to explore the best options.
Why Use Property Auctions as part of an Investor Strategy?
Auctions can be a faster and potentially more profitable route if you’re looking to divest properties. You can sell properties at competitive bidding events like those hosted by Auction House London, reach motivated buyers, and close sales quickly.
VAT on Private Schools
Starting in 2025, a 20% VAT will be applied to private school fees. This could impact property investors with children in private education, influencing their household budgets and investment decisions.
What You Can Do:
Revisit Budgeting Strategies: Affected investors should rebalance their investment and personal financial planning to accommodate these new costs.
How to Navigate the Changes and Why Auctions Could Be a Smart Move!
The Autumn Budget 2024 signals a more challenging fiscal environment for property investors. The changes, both directly and indirectly, could significantly influence investment profitability. To stay ahead, investors should take a proactive approach:
Reassessing Investment Strategies: Evaluate whether holding or selling assets fits your financial goals.
Utilising Tax Allowances: Maximise available allowances to mitigate tax impacts.
Restructuring Portfolios: Adapt investment strategies to align with new regulations.
How Auctions Can Help You Stay Ahead
Whether looking to sell properties quickly to avoid higher tax liabilities or to seize new opportunities, buying and selling at auctions offers flexibility, competitive pricing, and speed. With the property market becoming more complex, auctions can be an attractive option for liquidating assets efficiently or discovering investment opportunities at great value.
Visit Auction House London to explore current listings or inquire about selling your property at auction.
By staying informed and planning strategically, property investors can continue to safeguard their portfolios amid the evolving market.
Remember to seek professional, independent advice to tailor your strategy to your circumstances.
Disclaimer: This report aims to provide general guidance for investors and is not financial advice. Always consult a qualified professional for specific advice.