With Labour’s first Budget set for Wednesday 30th October 2024, many homeowners and UK taxpayers are uncertain about the changes that could lie ahead, especially since the government has been hinting at using spending cuts and tax reforms to address a £22bn fiscal hole.
Whether you're worried about your investments, your mortgage, or are simply trying to understand how your finances could be impacted, we’ve put together a breakdown of the key ways it could affect you as a taxpayer and homeowner.
1. Income tax changes
The government has said it wants to focus on reducing wealth inequality, which could mean changes to the tax system. For those with higher incomes, we may see increased tax rates on the top earners, though it’s unlikely to affect middle-income earners as much.
There may be shifts in tax thresholds or new levies on very high incomes, particularly for those earning over £100,000. If you're in this bracket, it's worth preparing for potential changes to your take-home salary.
2. Capital gains tax, inheritance tax and other investments
While Labour pledged not to increase income tax for “working people”, National Insurance, or VAT, capital gains tax (CGT) is a potential area where changes might be made. Although Rachel Reeves, the Chancellor, previously said there were "no plans" to raise CGT, the party might be considering small adjustments, specifically targeting the sale of shares and other assets1 rather than property2.
If you own a second property, run a holiday let or have a portfolio of investments, you might want to consider your options in any case. Taking stock of what you’ve got before announcements are made could be a good way to keep calm, and plan ahead.
There also seem to be discussions about tightening inheritance tax exemptions, including potentially removing exemptions for business assets, agricultural land, and pensions. This could lead to higher tax bills for estates, particularly those that own multiple properties.
3. Property taxes: stamp duty and council tax
While nothing is known at this stage, there’s been speculation that Labour could overhaul stamp duty and council tax with the aim of making them more progressive—meaning higher-value properties could see higher rates of tax.
While no specific policies have been confirmed, a revaluation of council tax bands or stamp duty thresholds could be on the cards. This would likely affect homeowners living in high-value areas or properties, even if they’re not high-income earners. Labour has, however, ruled out adjustments to the single-person council tax discount, which will remain unchanged
It's worth keeping an ear to the ground for any announcements that could impact your property’s running costs.
4. Housing market policies: supporting first-time buyers
Labour has long been vocal about the housing crisis, so we can expect policies aimed at increasing homeownership, especially for first-time buyers. This could include incentives like help-to-buy schemes or reforms that make the housing market more accessible for younger buyers. There is speculation that Labour could revert the first-time buyer stamp duty threshold from £425,000 back to £300,000, impacting buyers who are in the higher threshold regions.
Stamp duty for foreign buyers: Labour may introduce a higher surcharge for foreign property buyers, raising it from 2% to 3%. This move would aim to give UK residents an advantage in the housing market and help curb rising property prices that are fueled by foreign investment4.
5. Mortgage rates and inflation
Many homeowners are concerned about the possibility of rising mortgage rates, especially if inflation remains as stubborn as it has. While the government can't directly control interest rates—that's the Bank of England's role—their broader economic policies could influence inflation levels and the cost of borrowing.
Labour is expected to focus on public investment in infrastructure, green energy like carbon capture, and social services. While these measures could stimulate economic growth, they could also have an inflationary effect. If inflation does rise, the Bank of England may respond by hiking interest rates, which would impact mortgage holders.
If you have a variable-rate mortgage, it could be wise to review your options either way. Whether inflation drops again (as it did earlier this October) or rises, if you have a fixed-rate mortgage that’s nearing renewal, you should monitor interest rate trends closely to ensure you're getting the best deal.
6. Pension reform: impact on retirement savings
If you're nearing retirement or have substantial pension investments, any potential pension reforms could affect you. The government has previously indicated they might cap pension tax relief for higher earners, which could limit how much you benefit from saving into your pension if you're in a higher tax bracket5.
There’s also speculation that pension funds could be included in inheritance tax, affecting estate planning for many homeowners with considerable pension savings.
While the specifics of any changes are still unclear, it's wise to review your retirement savings strategy to make sure you're making the most of current tax relief opportunities.
7. Green initiatives: energy costs and home improvements
Labour’s focus on environmental policies means we’re likely to see incentives or requirements for making homes more energy-efficient. This could include grants for installing solar panels, improving insulation, or upgrading heating systems. If you're a homeowner considering any major renovations, these could be worth factoring into your plans.
While these initiatives might involve upfront costs, they could lead to long-term savings on energy bills and potentially increase the value of your home. Keep an eye on any available grants or schemes that could help with the initial investment.
Alternatively, a low-interest loan like Selina’s HELOC could be a great way of funding energy-efficient changes to your home.
Learn more about a Selina HELOC.
Final thoughts: how could the new Budget affect me?
If you’re feeling uncertain about how Labour’s first Budget might affect your finances, now is the time to prepare:
- Review your income and tax situation: if you’re in a higher income bracket, consider discussing potential tax planning strategies with a financial advisor.
- Keep an eye on capital gains: if you’re thinking of selling assets, it may be worth doing so before any significant changes to CGT.
- Plan for mortgage rate rises: if you’re on a variable mortgage, exploring fixed-rate options could help you avoid future hikes.
- Consider green home improvements: consider a second charge mortgage like a HELOC and look out for government incentives to upgrade your property and save on energy bills.
Ultimately, while Labour’s first Budget could bring changes, many of the potential shifts would be gradual, giving you plenty of time to adjust your financial plans. Staying informed and being proactive will ensure that you’re well-prepared, whatever the future holds.
To learn more about how Selina can help improve your finances, visit our site or speak to one of our advisors today
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1 https://hoa.org.uk/news/budget-2024-predictions/
3 https://moneytothemasses.com/news/5-autumn-budget-predictions-2024-what-to-expect-in-october
4 https://labourlist.org/2024/10/treasury-news-budget-2024-chancellor-what-policies-rachel-reeves-tax/
5 https://www.hl.co.uk/news/autumn-budget-what-could-rachel-reeves-budget-mean-for-taxes
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