On 26 November, Rachel Reeves will announce the government’s plans for taxes, spending and borrowing.
This will follow weeks of swirling rumours and speculation across the property industry and wider economy. While nobody can yet know what Reeves will say, let’s look at some potential scenarios for property buyers, sellers and landlords.
Stamp duty changes to help buyers
As stamp duty land tax (SDLT) is a hefty cost when buying a new home, economists and industry experts have nervously speculated about possible changes. Currently, it’s the buyer’s responsibility to pay the stamp duty within 28 days of completing the purchase. But could the government lighten this financial burden?
One idea is to allow buyers to spread the stamp duty cost over a longer period, rather than paying it all up front. This would make it more affordable to move house, especially for first-time buyers who otherwise need to save up for their stamp duty bill beforehand. It’s not yet clear how this could work – when the tax would be collected and in what amounts – but the idea has excited many people.
Another idea is that the tax bill could pass from the buyer to the seller – no doubt a popular concept for anyone struggling to get onto the property ladder. If Reeves goes ahead with this change, buyers’ enthusiasm will contrast with the complaints of sellers who have already paid stamp duty under the old system and will need to pay a second time.
Other reports suggest that stamp duty could be replaced with a property tax for sellers of homes over £500,000.
Whatever the changes, the government is keen to make buying a house more affordable, especially for first-time buyers and people on lower incomes.
A potential overhaul for property taxes
The government might make significant changes to the way properties are taxed. For instance, they could replace stamp duty and council tax with a single annual levy on homes of a certain value. This would impact the South East and London the most.
Another idea? They could increase council taxes for more expensive properties. Or introduce a capital gains tax when people sell their primary home for more than a set amount. No matter the specific reforms, the changes will most affect people with multiple properties, investors and landlords selling up.
National Insurance for landlords
Currently, income from buy-to-let properties is usually exempt from National Insurance (NI) contributions. But the government is thinking about asking landlords to pay NI in line with employees or the self-employed.
Some argue this hit to landlords’ earnings will reduce the number of rental properties – and therefore push up rents – at a time when the private rented sector is already facing an upheaval from the Renters’ Rights Act. However, others think it’s fair for everyone to pay NI on their earnings.
Final thoughts
Right now, we must remember that the above is all speculation. Until Reeves announces the Budget, we can only guess at what’s in store for the housing market and the private rented sector. This isn’t to say people should wait to buy or sell a property. Times of uncertainty can create opportunities for buyers, in particular. But, as ever, it’s crucial to understand the financial risks involved and carefully think through your options.
