The UK’s first female Chancellor has spoken in what is Labour’s first Budget for 14 years. A raft of financial measures aimed at protecting working people, fixing the NHS and rebuilding Britain were unveiled by Rachel Reeves earlier today (October 30).
Here’s an overview of the key announcements* that are anticipated to have the greatest impact on property developers and the wider UK housebuilding sector:
Inflation forecasts
CPI inflation will average:
- 5% this year
- 6% in 2025
- 3% in 2026
- 1% in 2027
- 1% in 2028
- 2% in 2029.
Learn more: https://www.reuters.com/world/uk/uks-reeves-announces-budget-plans-parliament-2024-10-30/
Growth forecasts
The Office for Budget Responsibility (OBR) has published a detailed assessment of Labour's policies for the next decade. GDP growth is anticipated to be:
- 1% in 2024
- 2% in 2025
- 8% in 2026
- 5% in 2027
- 5% in 2028
- 6% in 2029.
According to the OBR, the economy will grow by faster than originally expected this and next year. However, the UK economy will not expand as quickly as the OBR predicted for 2026, 2027 and 2028.
The OBR’s growth and inflation forecasts have sparked speculation that interest rates could potentially fall more slowly than currently forecast.
Learn more: https://www.cityam.com/autumn-budget-2024-obr-upgrades-forecasts-on-how-much-economy-will-grow/
Housebuilding investment
The Government will invest more than £5billion in delivering its housing plan. The Affordable Homes Programme will be increased to £3.1billion and provide £3billion worth of support and guarantees to increase the supply of homes and support small housebuilders.
Learn more: https://www.propertyreporter.co.uk/budget-2024-affordable-homes-programme-to-get-500m-top-up.html
Stamp Duty Land Tax
The Stamp Duty Land Tax (SDLT) surcharge on second homes and investment properties will increase from 3% to 5% in an effort to support more than 130,000 additional transactions from people buying their first home, or moving home, over the next five years. While this measure is anticipated to narrow part of the exit market, it will also support home ownership by shifting demand away from investors and towards those purchasing primary residences.
Learn more: https://propertyindustryeye.com/property-industry-reacts-to-the-autumn-budget-2024/
Employers' Allowance National Insurance Contributions
National Insurance contributions by employers will increase from 13.8% to 15%. Meanwhile, the threshold at which businesses start paying National Insurance on workers' earnings will be reduced from £9,100 to £5,000.
Employement Allowance
The Employment Allowance will rise from £5,000 to £10,500 to help support smaller businesses. As a result, 865,000 employers will not be required to pay any National Insurance next year. In addition, more than one million employers will pay the same or less as they previously did.
Electric vehicle incentives
Existing incentives relating to EV company car tax from 2028 will be maintained. The differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty, beginning in April 2025, will be increased.
Learn more: https://www.gbnews.com/lifestyle/cars/budget-2024-rachel-reeves-major-car-tax-changes-electric-vehicles
Income Tax and National Insurance
The Government will not extend the freeze on Income Tax and National Insurance thresholds beyond 2028. From 2028-29, personal tax thresholds will be uprated in line with inflation.
Mike Bristow, CEO of CrowdProperty comments:
"I welcome the Government's commitment to invest over £5 billion in its housing plan. The significant increase in funding for the Affordable Homes Programme and the £3 billion in support and guarantees are pivotal steps towards addressing the UK’s housing shortage. This initiative not only promises to expand the supply of affordable homes, but also strengthen the support system for SME developers and housebuilders, whose role in the market is more crucial than ever. Meanwhile, the uplift in outputs could also mean an additional £15billion+ spending on labour, materials and services, which is to be welcomed.
“By empowering smaller developers, the Government is fostering a more diverse and resilient housing market, which will be essential in meeting long-term demand for quality homes across the country.
“The Chancellor has today set out her vision for how the new Government intends to ignite the UK’s housebuilding outputs and ‘get Britain building again.’ It’s a vision that will undoubtedly involve widespread sector involvement and require considerable reform to the planning process in order to remove the barriers that currently exist.
“We look forward to seeing the impact of today’s Budget measures over the coming weeks and months, and will continue to support developers in seizing the opportunities the additional Government funding brings, helping to drive sustainable growth and meet the nation's housing needs in the process.”
* Details correct as of 30th October 2024.
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