New 2024 Budget Tax Rules Explained for UK Property Investors/Owners

New 2024 Budget Tax Rules Explained for UK Property Investors/Owners

The UK’s 2024 Budget, introduced by Labour Chancellor Rachel Reeves, has brought a wave of new tax policies. These updates are set to reshape the property landscape, and as property owners and investors, it’s essential to understand how these changes might impact you. Let’s break down each key announcement and what it could mean for your financial planning.


1. Capital Gains Tax Increase – Effective April 2025

What’s Changing?
Starting in April 2025, capital gains tax (CGT) will see a significant increase. Here’s the breakdown:

  • The basic CGT rate will rise from 10% to 18%.
  • The higher rate will increase from 20% to 24%.

For property investors, this is especially important. Capital gains on residential properties will remain higher, meaning individuals in the higher tax bracket will see their CGT rate on property disposals reach 24% from April 2025. This is a substantial change, so planning sales or exits from investment properties may need re-evaluation to manage tax liability effectively​ The Independent

How It Affects You
If you’re planning to sell a property or other valuable assets, be prepared for a higher tax bill on profits. This change could discourage short-term property flipping, encouraging investors to hold properties longer to maximize returns.


2. Inheritance Tax (IHT) Freeze and Expansion

Key Details
Inheritance tax thresholds are staying put, with a freeze on the £325,000 nil-rate band extended until 2030. Additionally:

  • Inherited pensions, which were previously tax-free, will now be subject to inheritance tax starting April 2027.
  • Business Property Relief (BPR) and Agricultural Property Relief (APR) will be adjusted from April 2026. The first £1 million in assets will remain IHT-free, but assets above this will attract a 50% relief, leading to an effective 20% rate on qualifying business and agricultural assets.

What It Means for Estate Planning
The extension of the nil-rate band freeze could mean more estates fall into the IHT bracket as property values rise. Importantly, the inclusion of inherited pensions in IHT calculations is a major shift. Previously, pensions were a tool for passing on wealth tax-free. From 2027, they’ll be subject to IHT if they exceed the threshold, prompting the need for updated estate planning KPMG


3. Non-Domiciled (“Non-Dom”) Tax Abolishment – April 2025

What’s Happening?
As expected, the government will abolish the non-domicile tax status (non-dom status) in April 2025. This move aims to bring fairness to the tax system, requiring all long-term UK residents, including foreign nationals who previously benefited from non-dom status, to pay taxes on their global income.

Impact on Foreign Investors
This change primarily affects foreign nationals living in the UK who currently benefit from reduced tax on overseas income. From 2025, long-term UK residents will be taxed on their global income and assets, which could discourage some overseas investment in the UK property market​.

 


4. Stamp Duty Adjustments on Second Homes and Buy-to-Let Properties

Details of the Update
Contrary to speculations about threshold increases, the Budget introduced a rise in stamp duty for buy-to-let properties and second homes, moving from 2% to 5%. This increase is aimed at cooling the demand in the buy-to-let market, particularly among wealthier investors.

How It Affects Property Buyers
This hike in stamp duty could make additional property purchases more costly, potentially slowing the growth of the buy-to-let sector. For those looking to expand property portfolios, it’s worth calculating the impact of these higher upfront costs on investment returns​.

 


5. National Insurance Contributions Rise for Employers

Overview of the Changes
From April 2025, the employers’ National Insurance contribution rate will increase from 13.8% to 15%. This change is part of Labour’s broader plan to increase revenue, which includes contributions from businesses.

Implications for Property Businesses
For property management companies and businesses with a significant workforce, this increase in NIC could lead to higher operational costs. Employers may need to budget accordingly and consider potential adjustments in hiring and payroll strategies​.


6. Pensions and Retirement Changes

Inherited Pensions
One of the most notable changes in the 2024 Budget is the inclusion of inherited pensions in the inheritance taxbracket, effective April 2027. Previously, pensions were shielded from IHT, allowing wealth to be passed to beneficiaries tax-free. This change could lead to a substantial tax liability on large pensions, necessitating a fresh look at retirement planning and wealth transfer strategies.

Considerations for Investors
If you’ve been relying on pensions as a tax-efficient way to pass on wealth, you may want to explore alternative options. Consulting a financial advisor can provide insights into how these changes may affect your specific situation​.


Conclusion: Navigating the Changes in the 2024 Budget

The 2024 UK Budget brings substantial changes to the tax landscape, particularly for property owners, investors, and high-net-worth individuals. With higher capital gains tax rates, adjustments to inheritance tax, the abolition of non-dom status, and increased costs for employers, these policies are set to reshape investment strategies in the UK.

For property investors, this budget underscores the importance of strategic planning and proactive financial management. Whether you’re considering selling assets, expanding your property portfolio, or revising your estate plans, these tax changes require careful consideration.

Take Action: To understand how these changes specifically affect your property investments or to explore tax-efficient strategies tailored to the new rules, reach out to financial experts or advisors. At Touchstone London, we’re here to help you navigate the evolving property landscape with confidence and insight.

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