As we enter a new tax year, what impact will the Spring Budget have on the housing market? 

When the Spring Budget was unveiled by Chancellor Jeremy Hunt on Wednesday 6 March, expectations were high for the housing sector with some of the following reforms thought to be an option:

• More first-time buyer schemes or initiatives – Like the popular Help to Buy Equity Loan which ended on 31 March 2023. 
• Scrapping the lifetime ISA (LISA) 6.25% penalty fees – So that first-time buyers withdrawing savings from a lifetime ISA account to buy a property over the £450,000 price limit would not be penalised.
• A 99% mortgage scheme – Meaning those who are easily able to meet monthly rental payments but are unable to save the large, lump sum deposits necessary to gain a mortgage (generally down to said sky high rental prices!) can get a foot on the property ladder with a 1% deposit. 
• ‘Green’ incentives for landlords – With grants and/or tax saving options for improving the energy efficiency of rental properties which in turn helps tenants with a better quality and more energy efficient home.  
• Regional variations for stamp duty – Taking the capital’s sky-high house prices into account.
• Making current first time buyer rates for stamp duty permanent – With the higher, temporary nil rate for properties valued up to £425,000 being retained after 31 March 2025. 
• Making stamp duty no longer applicable for downsizers – to introduce the proverbial carrot for older homeowners holding onto larger family homes which are unsuitable for their current needs. 

Unfortunately, the Budget’s housing market focus was much more limited, and disappointingly there was no reference to mortgages at all. A fact which didn’t go unnoticed or without comment from the housing sector. According to Rightmove’s mortgage expert Matt Smith: 

“With mortgages being a central issue in 2023, it’s surprising to see no reference to them in the entire 98-page document of the Spring Budget. While there were rumours of a 99% mortgage scheme, it was seemingly abandoned without a replacement. This is a missed opportunity to introduce more creative solutions for first-time buyers with limited deposits and those facing challenges in securing adequate financing to enter the housing market.”

Regrettably, the hoped for reform of stamp duty, particularly when it comes to downsizers and first-time buyers, was also missing from the Budget. This was disappointing given the considerable barrier that stamp duty costs can pose to potential home movers – adding a significant financial burden on top of other moving expenses.  

Instead, the Government have chosen to focus on the following measures in the 2024-25 financial year when it comes to the housing sector:

• A cut to the highest rate of Capital Gains Tax – Most people will never need to pay capital gains tax (CGT) when they sell a home. When you sell the home you live in as a main residence, you have private residence tax relief so the profits are yours alone to keep. However, if you inherit a property when a parent or loved one passes away, it will incur CGT if you decide to sell the property. The lower rate of CGT (18%) for basic rate tax payers will remain unchanged, but the Spring Budget has reduced the higher rate of CGT for residential property sales from 28% to 24% as of 6 April 2024. 

• Abolishing multiple dwellings relief when it comes to stamp duty: Originally intended to encourage investments in the private rental sector by reducing stamp duty costs for landlords, a review has shown that uptake on the tax relief has been lower than anticipated. Consequently, the government has decided to end this relief as of 1 June 2024.

• Phasing-out tax breaks for furnished holiday lettings: The government aims to increase the availability of long-term rental properties, especially in tourist-heavy areas where such options are scarce, by eliminating tax advantages for short-term furnished holiday lettings. This move will align the tax treatment of long and short-term rentals. However, this change is not set to take effect until April 2025.

• Funding for new housing development in the Capital – The Chancellor announced funding for house building in East London, with £124m earmarked for 7,200 new homes to be built in Barking Riverside and £118m for 750 homes to be created in Canary Wharf. 

With current stamp duty rates due to expire in Spring 2025, and limited changes in the pipeline so far from Labour, plus the watering down of plans to cap leasehold ground rents, it remains to be seen whether we will see the promised housing market reform which all parties have said is necessary (but not committed to) in the wake of the general election which is anticipated later this year. There will certainly need to be more focused commitments in the Autumn Budget if so.