Will the Spring Budget 2024 help me sell my house?
Jeremy Hunt has announced the Spring Budget 2024, but what does it mean for house sellers?
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The Spring Budget 2024 aimed to stimulate the economy through various measures, but its impact on the housing market and your ability to sell your house is complex and depends on your specific situation.
While some aspects might benefit sellers, others could pose challenges, especially depending on your specific property types and locations.
In this article we will cover the advantages and disadvantages of the budget for home sellers, and also dive into the broader economic landscape to help you understand whether the budget might contribute to a faster economic recovery and potentially benefit households in the long run.
What things do you need to know from the Spring Budget 2024?
The Spring Budget focused on stimulating economic growth by reducing taxes, freezing fuel duty and supporting specific sectors like finance and the NHS, helping to digitalise them into the 21st century.
The Spring Budget aimed to reduce taxes primarily through the National Insurance cut, changes to Capital Gains Tax, freezing fuel duty which aims to ease cost pressures faced by individuals and businesses and support the new British ISA and continued funding for green energy projects.
While the Spring Budget 2024 announced many changes to the broader economic landscape of the UK, here are some key announcements which stood out:
For individuals:
- National Insurance Cut: A further 2p cut in National Insurance, reducing it from 10% to 8% for employees and from 8% to 6% for the self-employed, aiming to put more money in people’s pockets.
- Changes to child benefits: Increased threshold for claiming full or partial child benefits, potentially benefiting up to 500,000 families with children.
- Fuel duty freeze extended: Continued freeze on fuel duty until March 2025, offering some relief for motorists facing rising fuel costs.
- New British ISA launched: Introduction of a new ISA with a £5,000 annual allowance specifically for investing in UK assets, offering tax-free returns.
For businesses:
Higher rate of Capital Gains Tax on property sales reduced: Reduction from 28% to 24%, potentially benefiting higher-rate taxpayers selling property.
Scrapped tax benefits for holiday lets: Abolition of tax breaks for those renting out properties to tourists, potentially impacting the holiday rental market.
Threshold for VAT registration raised: Increased from £85,000 to £90,000, offering some relief for small businesses.
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Was the Spring Budget 2024 a good thing?
The reality of the 2024 Spring Budget is that it is a mixed bag, as the budget aims to stimulate economic recovery and offers some relief to households, which could be beneficial in the short term. But critics argue it doesn’t address long-term challenges like public services, fiscal sustainability, and tax reform, which are vital for long-term economic health.
If you prioritise immediate economic recovery and household relief, you might see this budget announcement as a positive step. But if you prioritise addressing underlying economic issues like public service performance and fiscal sustainability, you might see it as lacking in that regard.
Is the economy recovering?
The OBR’s revised growth forecast suggests the Spring Budget might contribute to a faster economic recovery from the recent recession, benefiting businesses and employment. With measures like the reduced Capital Gains Tax and adjustments to First Time Buyers’ relief putting more money in the pockets of individuals and families, boosting consumer spending and confidence.
The budget also aims to increase the housing supply in the long run through its various investment zones which could benefit the housing market in the future.
However, The impact of so many measures, particularly those related to housing, is uncertain and might have both positive and negative consequences depending on what economic landslide decides to hit us next.
Critics argue that the budget doesn’t adequately address long-term challenges like public services and fiscal sustainability which are important for long-term economic health. They even argue that measures like the reduced CGT rate will only benefit wealthier individuals, which exacerbates existing inequalities.
What are all the tax changes announced in the Spring Budget?
- The National Insurance (NI) cut: Aims to give more people more take-home pay, in order to boost consumer spending.
- The Fuel duty cut: Helps reduce transportation costs for individuals and businesses reliant on fuel.
- Non-domiciled resident (non-dom) tax reform: This aims to raise revenue from people who claim non-domiciled status for tax purposes.
- New tax on vaping products: This could generate tax revenue while potentially discouraging vaping.
- Long-term impact on tax reform: The overall effect of these challenges on long-term plans for reforming the tax system is unclear. It’s difficult to say if they represent a cohesive strategy or a collection of isolated measures.
- Fiscal sustainability: Whether these changes will contribute to long-term fiscal sustainability (manageable debt and spending) is also uncertain. Tax cuts might lower revenue, while the impact of tax rises and new taxes is yet to be seen.
- Fuel duty freeze: The continued freeze on fuel duty, despite promises of future increases, highlights the difficulty of implementing unpopular tax measures, even if they might be fiscally responsible in the long run. This prioritises short-term political considerations over long-term fiscal strategies.
What about the government’s fiscal headroom?
The budget’s measures have slightly narrowed the space available for the government to take on additional spending in the future. This limits their ability to respond to unexpected events or invest in essential services.
The budget highlights the limitations of the UK’s current fiscal framework, raising concerns about its ability to manage the country’s finances effectively.
The budget also demonstrates the difficulty of balancing the desire for tax cuts with the need for fiscal sustainability, which is the ability to maintain a manageable level of debt and spending in the long run.
Critics argue that the budget missed an opportunity to address fundamental fiscal challenges such as underperformance in public services and stabilising the national debt.
How will the budget impact public service spending?
Well, the good news is that the budget doesn’t significantly cut public spending, with even a minor increase for the digitisation of the NHS, suggesting that there is a commitment to maintaining basic service provision.
But, maintaining spending levels may not be enough to address existing issues and meet rising demands, which could lead to continued strain on all public services (education, infrastructure, and social care).
The Budget suggests a lack of significant improvement in public service performance before the election. This coupled with the limited budget increase, might lead to public dissatisfaction with the government’s efforts to address public service concerns.
Some critics of the budget suggest a bleak outlook for spending on non-protected services from April 2025, suggesting potential cuts or slower growth in funding for these services.
What are the prospects for household finances in 2024?
The overall household finances in 2024 may see a slight improvement, but significant challenges remain. Real incomes are likely to stay below pre-pandemic levels, and the impact of the budget measures might be limited.
The OBR forecasts a slight rise in disposable income per person for the 2024/25 tax year. This means people might have a little more money left after taxes to cover their expenses.
Disposable income is expected to reach pre-pandemic levels by the following year, suggesting a potential recovery from the financial impact of the pandemic. This tied with the National insurance cut is set to contribute to a higher post-tax income for individuals across the country.
But, the increase in disposable income is forecast to be modest, meaning it may not change the financial situation for many households. The freeze on income tax and national insurance thresholds could counteract some of the benefits of the national insurance cut, as people might end up paying more tax due to inflation pushing them into higher tax brackets.
Even with the projected rise, real incomes (adjusted for inflation) are still expected to be lower than they were at the start of the government’s term in 2019. This suggests a potential decline in purchasing power for many households.
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How does the Spring Budget 2024 impact property?
While the Spring Budget offers some potential benefits for selling Buy To Let properties, it also introduces challenges for MDR and FHL’s. Meanwhile, the focus on new home developments presents both opportunities and risks. Let’s dive deeper into each property type and understand how the budget might impact them.
Buy To Let property
As we have mentioned previously, the reduction in the higher rate of CGT directly benefits landlords and investors selling Buy To Let properties. This could make selling these properties more financially attractive, potentially leading to increased BTL property transactions and earlier sales.
Landlords might be more involved in selling their Buy To Let properties if they can keep a larger portion of the profit due to the lower tax rate. This could increase the overall number of BTL properties on the market.
Also, landlords who were previously holding onto properties might decide to sell sooner to take advantage of the lower CGT rate.
But, the increased number of BTL properties for sale could lead to increased competition among sellers, putting a downward pressure on selling prices. Increased sales could lead to a temporary oversupply, but it could also encourage new investors to enter the market if they see opportunities.
Multiple Dwellings
Multiple Dwellings offered a tax advantage for buyers purchasing multiple residential properties in a single transaction. This reduced the overall Stamp Duty Land Tax (SDLT) liability compared to buying them individually.
Without MDR, the SDLT for buying multiple dwellings at once will be significantly higher. This could discourage bulk property purchases, especially for larger landlords who might have previously used MDR to their advantage.
This measure could have a significant impact on the Buy-To-Let sector, where investors often buy multiple properties to build their portfolio. The higher upfront cost due to increased SDLT might deter some investors from entering the market or limit the number of properties they can acquire.
Furnished Holiday Lettings
The Furnished Holiday Lets offered several tax advantages, including; lower capital gains tax rate on property sales, relief from income tax on rental profits and the ability to offset mortgage interest and other expenses against rental income.
With the abolition of the FHL scheme, these tax benefits will be discontinued, making FHL properties less attractive as investments. This could lead to:
- Reduced profitability: Businesses and investors relying on FHL income might see a significant decrease in profits due to higher tax burdens.
- Increased selling activity: Some owners might choose to sell their FHL properties as they become less profitable, potentially leading to an increased supply of properties on the market.
- Market shift: The abolishment could discourage new entrants and potentially lead to a shrinkage of the FHL market in the long run.
The increased availability of former Furnished Holiday Letting properties could benefit renters in areas struggling with a shortage of long-term rentals, as the intended consequence of the policy is to push these properties into the long-term rental market.
However, the short-term impact might be increased competition among renters, potentially leading to higher rents in some areas due to the sudden influx of available properties.
New Home Developments
The Spring Budget’s focus on building one million homes by the end of the Parliament suggests a potential boost for new home developments, but the impact on the market remains uncertain.
The government’s commitment to building one million homes could lead to an increased supply of new properties. This could benefit first-time buyers and potentially moderate price growth for new builds in the long run.
The budget mentions specific areas like Canary Wharf, Blackpool, Sheffield, Liverpool and Cambridge. This suggests a focus on rejuvenating areas and addressing housing shortages in those locations.
Building one million homes is an ambitious target, and achieving it within the Parliament’s time frame might be challenging. Delays in construction could limit the short-term impact on housing supply.
Will the Spring Budget 2024 help me sell my house?
The Spring Budget 2024’s impact on whether you will be able to sell your house is complicated and completely depends on your circumstances. While some aspects of the budget support sellers, others pose challenges, especially if you are looking to sell a property investment.
What are the benefits of the Spring Budget for house sellers?
While the 2024 Spring Budget didn’t introduce sweeping changes specifically targeted at house sellers, it does offer a couple of potential benefits:
The higher rate of Capital Gains Tax on property sales has been reduced from 28% to 24%. This means you’ll keep more of the profit from the sale of your house if you’re a higher-rate taxpayer.
Sellers who are liable for Capital Gains Tax might keep a larger portion of their profits due to the reduced tax rate. This could be especially relevant for sellers who fall under the higher tax band.
But, it’s important to note that you may not be eligible for this CGT reduction due to Private Residence Relief. This relief exempts most people from paying Capital Gains Tax on the sale of their main residence, so the reduced tax rate will only apply if you are selling a second property.
The budget includes measures like extending the Mortgage Guarantee Scheme and adjustments to First Time Buyers’ relief, which could incentivise more people to buy and increase the pool of potential buyers.
Currently, some landlords might choose to keep their properties as holiday lets due to the tax advantages of the Furnished Holiday Lettings (FHL) scheme.
In the Spring Budget, Mr Hunt announced that they were to abolish this scheme, which might result in landlords selling these properties or converting them to long-term rental properties. This in turn could create a larger pool of potential buyers looking for residential or long-term rental properties.
But, it’s important to note that in the short term, the FHL scheme abolishment will cause a flood of properties onto the market as many landlords look to sell first before looking for their next properties.
The abolition of Multiple Dwellings Relief has the potential to benefit house sellers in a few ways, like increasing the amount of potential buyers within the market.
Previously MDR offered tax advantages for buying properties in bulk. With its removal, investors might shift their strategy towards buying individual properties. This could lead to a larger pool of potential buyers for individual houses on the market.
While a larger pool of buyers might sound universally positive, it could also lead to increased competition among them. This competition could drive up asking prices or even encourage bidding wars, potentially leading to a better selling price for house sellers.
Furthermore, an increased number of buyers interested in individual properties could mean houses spend less time on the market, potentially resulting in faster sales for sellers.
However, this potential benefits needs to be considered alongside:
- Increased availability of long-term rentals: The scrapping of tax breaks for holiday lets could potentially lead to more properties becoming available for long-term rentals, which may increase competition as buyers have more options.
- Uncertainty over future measures: While not announced in this budget, the government might consider measures like Stamp duty cuts or support schemes for first-time buyers in future budgets to address housing affordability concerns.
What are the negatives of the Spring Budget for house sellers?
While the Spring Budget 2024 prioritises curbing inflation, some measures might indirectly impact the housing market, particularly for property investors and owners of multiple properties. Concerns have been raised that these individuals could face a reduced pool of potential buyers.
As we established previously, the MDR used to offer a tax break for bulk property purchases. Without this relief, the overall Stamp Duty Land Tax cost for buying multiple properties at once becomes higher. This could discourage some investors who previously might have been interested in buying multiple properties in a single transaction.
A smaller pool of potential bulk buyers could lead to:
- Difficulty finding a buyer: Sellers looking to offload multiple properties at once might face challenges finding a buyer willing to take on the entire package potentially leading to longer selling times.
- Lower selling price: With fewer interested buyers, sellers might have to negotiate a lower price to attract a buyer willing to handle the higher SDLT costs without the MDR relief.
Currently, some investors might be specifically interested in acquiring holiday lets due to the tax advantages offered by the FHL scheme. Abolishing the scheme could make these properties less attractive to them, potentially reducing the pool of interested buyers for these sellers.
With a potentially smaller pool of buyers and potentially less competition, sellers might have to lower their asking prices to attract buyers who are no longer motivated by the FHL benefits.
In the worst case scenario, if there’s a significant decrease in investor interest in holiday lets due to the abolished FHL scheme, some sellers might face difficulty finding buyers altogether, leading to longer selling times.
A lower CGT rate might incentivise more sellers to list their properties, increasing competition amongst higher bracket sellers. This could be particularly problematic in areas with an already saturated market or an oversupply of houses.
With more sellers competing for a limited pool of buyers, it could lead to pressure on selling prices, potentially forcing some sellers to accept lower offers than they might have otherwise.
An increased number of sellers could add to the current buyer’s market in some areas, with sellers competing for fewer buyers. This situation could result in longer selling times and potentially lower selling prices for some sellers, particularly those in areas with oversupply.
How might the Budget impact supply & demand?
Sellers in both sellers’ markets and buyers’ markets will need to adapt their strategies. While the budget may have a limited effect in local sellers’ markets, it could increase supply and benefit buyers in struggling markets.
In a sellers’ market, the CGT reduction may incentivise listings, but high demand might absorb any increase in supply, keeping prices high. Whereas in a buyers’ market, the CGT reduction will have a modest impact, encouraging hesitant sellers to sell, increasing inventory and affecting local house prices.
The Multiple Dwellings Relief abolishment will have a limited impact within sellers’ markets due to strong demand, but it could affect bulk purchase strategies. In a buyer’s market, this will benefit buyers looking for single-property purchases but it will slow the overall market down.
The Furnished Holiday Let changes will increase seller market inventories, likely absorbing quickly with minimal price impact, but in buyers markets, the significant shift to long-term rentals or sales, may lead to oversupply and further price downward pressure.
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