The new UK Labour government has finally announced their budget, with new changes coming into action that will affect most of us in one way or another.
With the property market already in a volatile state, there are some things that could help property transactions follow through, even with the interruptions of cash flow due to the budget implications.
How Bridging Finance May Help Those Affected by the 2024 Budget Update
We understand that there may be some concerns for those that regularly invest in property, particularly those that utilise profits for further investments. Rest assured, that even if your profits are affected by the budget, then there are certainly ways to keep maximising profits while following the rules and regulations outlined in the new UK Budget.
Amidst the budget changes, there may be a need for more funds sooner than you had originally planned for, that in mind, bridging finance can be a good option to ensure that you don’t have to change your plan.
There may be fixes and varied implementations necessary to make your property fit to let for instance, which may require funding quicker than you had anticipated. For example, Reeves has described the future of the UK as a “clean-energy superpower”, to do this, there is pressure being put on making the UK more energy efficient, particularly when it comes to heating homes.
If you’re an investor that wants to keep energy efficient, particularly in buy-to-let homes, then it is important that you have the funds to do so. Before securing longer term finance, bridging loans and finance are a good way of securing the right efficiency stamp for a more attractive property on the market.
The key issue some investors may face is the disruption in cash flow, this disruption can be resolved by the help of bridging loans. Though bridging loans are a short term solution, they are a place marker to ensure that you’re not needing to re-start an already comprehensive and complicated business plan.
Instead, it can keep you on track, no matter the implications of the UK Autumn Budget.
What Does the Autumn Budget Mean for the Housing Market?
The autumn budget does indeed implicate the housing market in a number of ways. One of the key issues being mortgage rates, particularly because no cuts were mentioned, this is why it is more important than ever to act reactively with good deals in the housing market.
For instance, those choosing auction finance should be ensuring that they take the deals that are available to them, in order to do this, short term finance options can be a good option.
Bridging finance for instance can help you snap deals and allows you to take your time researching and finding an affordable mortgage provider so you’re not locked into a 30 year mortgage with sky high interest rates.
There are a few different areas of concern with the housing market, particularly affecting those that own or are purchasing second homes, these changes will be discussed further below, as the key change is regarding Stamp Duty and Capital Gains.
The housing market is likely to be affected due to the fact that the new budget can impact inflation. This level of potential inflation could mean that mortgage rates fall slower than we had expected, keeping the monthly costs of buying a home, unfortunately, higher.
The bottom line is however, this is likely to bring unexpected costs that may not have been planned for. If this is a position that you find yourself in, then bridging finance can help you to keep you on track and your business plan in place on those second properties.
How Stamp Duty Is Changing in the Budget Coverage
In the recent budget announcement, significant changes were introduced to the Stamp Duty Land Tax (SDLT), specifically targeting additional dwellings and corporate purchases.
Beginning right away on 31 October 2024, buyers acquiring second homes or additional properties will face a higher surcharge on SDLT, increasing from 3% to 5%. This measure, which includes purchases made by non-UK residents, is intended to discourage speculative property investments and relieve some of the housing market’s intense demand pressures.
The government projects that this change will stimulate the market for primary residence purchases, especially by first-time buyers, with an estimated 130,000 additional transactions over the next five years.
For corporate buyers, a similar rate increase is set to affect purchases of dwellings over £500,000. The SDLT for corporate entities purchasing high-value residential properties will rise from 15% to 17%, reflecting the government’s intent to tighten regulations around high-stakes property investments.
This adjustment will likely discourage corporate entities from acquiring large residential properties, which could further open up market opportunities for individual buyers and families seeking primary homes.
These SDLT changes in the Labour Autumn Budget 2024 aim to make the housing market more accessible, reduce competition from investors, and create a more balanced property landscape, particularly for those seeking a first or primary residence.
Key Property Takeaways of the 2024 Autumn Budget
The 2024 Autumn Budget introduces notable adjustments to capital gains tax (CGT) and new reforms targeting fire safety and cladding in residential buildings, impacting both individual property investors and developers.
These are two key changes that could affect your cash flow, so it is important to look into them closely.
Capital Gains Tax Increases
From 30 October 2024, the main rates of CGT will rise, with the lower rate moving from 10% to 18% and the higher rate from 20% to 24%. Additionally, Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will see gradual increases: from 10% to 14% on 6 April 2025, and then from 14% to 18% on 6 April 2026.
These changes may prompt property investors, especially those holding multiple assets, to adjust their strategies. Higher CGT rates could drive owners to consider bridging finance as a short-term tool for managing portfolios or acquiring new assets while minimising tax burdens.
Cladding Reforms and Safety Funding
In response to ongoing fire safety concerns, the new Budget reinforced government support for cladding removal and safety improvements in high-rise residential properties.
New funds aim to alleviate the financial strain on leaseholders, who have often been liable for costly safety upgrades.
For developers and property owners, compliance with these reforms may necessitate significant upfront costs. Bridging loans could serve as a strategic option to finance these immediate improvements, especially as compliant properties are likely to gain market appeal and value, while non-compliant properties may see depreciation.
Overall, the Budget’s capital gains tax changes and cladding reforms could reshape the property investment landscape, with bridging finance having the potential to play a pivotal role for those adjusting to new compliance demands.
Frequently Asked Questions
What is the new 2025 UK minimum wage?
Starting April 2025, the UK minimum wage will be £12.21 per hour for those aged 21 and over (National Living Wage). Younger workers will see adjusted rates, with £10.00 per hour for those aged 18-20, and £7.55 for 16-17-year-olds and apprentices. These changes aim to help workers manage rising living costs.
Will house prices drop in 2024 in the UK?
UK house prices in 2024 are expected to remain under pressure due to high interest rates, which can reduce demand and affect affordability. While some areas may experience modest declines, any drops are likely to be gradual, with overall trends depending on interest rate changes and economic stability.
Is now a good time to sell a house in 2024?
2024 could be a suitable time to sell for some homeowners, especially those in high-demand areas, as prices remain resilient despite economic challenges. However, high mortgage rates may limit the buyer pool, potentially slowing sales. If you’re a seller, you would benefit from researching local demand trends or consulting with real estate experts for the best timing.
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