Labour party, the governing party of the UK, is set to announce its first Budget later this month, with Chancellor Rachel Reeves expected to introduce several tax policy adjustments and shifts in government spending.
The Budget, scheduled for October 30, 2024, comes just four months after Labour took office. Key priorities include reducing national debt and stimulating economic growth, but the specific strategies for achieving these goals are still unknown, although, according to Sky News, there are speculations that the tax-free threshold could be removed.
Labour Prime Minister Keir Starmer has mentioned the possibility of increasing public spending, reaffirming his belief that “borrowing to invest” can serve as a “catalyst” for private investment—a stance he shared in a recent interview with Channel 4 News. While Labour has promised the public that there will be “no austerity,” Chancellor Reeves has mentioned that difficult decisions will be required to restore the economy.
Changes to the capital gains tax (CGT) have already been implemented under the previous Conservative administration, affecting property investors. In April 2024, the annual CGT exemption amount was reduced to £3,000, down from £6,000 the year before and from £12,300 in 2022/2023. Additionally, the higher CGT rate on gains from residential property sales has been reduced from 28% to 24% for gains after April 6, 2024. Gains that fall within the basic income tax band continue to be taxed at 18%.
Though there have been rumors that Labour might increase capital gains tax to help address the £22 billion budget shortfall, Rachel Reeves has publicly stated that there are no plans to raise this tax in the upcoming Budget. Speaking to BBC Radio 4, she said “There are people who have built up their own businesses who maybe at retirement want to sell that business. They may not have had huge income through their life if they’ve reinvested in their business, but this is their retirement pot of money.”
Initially, Labour had said they would “crack down” on non-doms – the term used to describe a UK resident whose permanent home (or domicile) for tax purposes is outside the UK. In its manifesto, the party had vowed to tighten the rules on where tax is paid, in order to bring in more money for the Treasury.
While this is still largely subject to change for the Budget, Labour is now said to be reconsidering these changes due to the fact that it could in fact bring in less revenue than expected. There is also the concern that wealthy non-doms could leave the UK, removing the benefits they bring to the economy.
Commenting on this, a Treasury spokesperson said: “These reports are speculation, not government policy. The independent Office for Budget Responsibility (OBR) will certify the costings of all measures announced at the Budget in the usual way.”
Further to this, a government official told the Financial Times: “We are looking at the details of our proposals. We will be pragmatic, not ideological. We won’t press on regardless, but we are not going to abandon this completely.”
The UK property market continues to be a destination of opportunity for overseas investors, due to the country’s strong economy, and resilient housing market.
Speculation is building around possible changes to stamp duty, a tax that affects all property transactions in the UK. Industry experts and stakeholders have long called for reforms, citing the tax as a hindrance to market activity.
The current higher threshold for first-time buyers, set at £425,000 in September 2022, is due to expire in April 2025. However, there is growing belief that Labour may revisit this in its Budget, potentially extending the higher threshold or introducing further changes.
Labour could also look at overhauling the entire stamp duty system by altering thresholds or tax rates to stimulate housing market activity.
For overseas investors, any adjustments to stamp duty and capital gains tax could influence property investment strategies in the UK. Despite any upcoming changes, the UK housing market’s resilience and long-term potential continue to make it a compelling option for investors.
Investing in the UK property market requires thorough research to make sure you’re investing in the right areas, trust in the developers, and patience until completion. With the help of our expert team in Value Invest, we can guide your way to wealth accumulation.
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