Our Autumn 2024 Budget Breakdown

Autumn Budget 2024: Key Tax Changes and Their Implications for the Real Estate Sector

The Autumn Statement is always a pivotal moment in the financial calendar, influencing everything from mortgage rates to investment strategies. For high-net-worth individuals (HNWIs), understanding these policy updates is crucial to managing and safeguarding wealth. At London FS, we simplify this year’s Autumn Statement so you can make informed financial decisions without wading through complex jargon.

Here’s a closer look at the 2024 Autumn Statement’s key areas, how it may affect the mortgage market, and some actionable financial planning tips for HNWIs navigating uncertain times.

Overview
On 30 October 2024, Chancellor Rachel Reeves presented the Autumn Budget, which included fewer tax adjustments than initially anticipated. Nevertheless, several updates directly impact the real estate sector, outlined below.

1. Stamp Duty Land Tax (SDLT) Changes

• Increased Surcharge on Additional Properties
  Effective from 31 October 2024, the SDLT surcharge for additional properties will rise from 3% to 5%. This applies to both UK residents and non-UK residents purchasing additional dwellings. The government anticipates this measure will encourage more first-time buyers and primary residence purchases, potentially increasing such transactions by 130,000 over the next five years.
• Higher SDLT Rate for Corporate Buyers
  Corporate buyers acquiring properties over £500,000 will now face a single SDLT rate increase from 15% to 17%, adding further costs for businesses involved in high-value property acquisitions.

2. Annual Tax on Enveloped Dwellings (ATED)

• The ATED charge, primarily applicable to companies owning UK residential properties, will increase for the 2025-2026 period, reflecting a 1.7% uplift based on the September Consumer Prices Index.

3. Business Rates for Retail, Hospitality, and Leisure Properties

• Starting in 2026-27, business rates multipliers for retail, hospitality, and leisure properties will be permanently reduced. To offset this, properties with rateable values over £500,000 will see a higher multiplier.

4. Abolition of the Furnished Holiday Lets (FHL) Tax Regime

• New legislation will remove the specific tax treatment and reporting requirements for Furnished Holiday Lets (FHL) from April 2025. Going forward, income and gains from FHLs will be taxed as part of an individual’s broader UK or overseas property business, aligning tax treatment for holiday lets with other property businesses. The change affects Income Tax and Capital Gains Tax from 6 April 2025 and Corporation Tax from 1 April 2025.

5. Introduction of the Reserved Investor Fund (RIF)

• The government is introducing a new UK-based investment fund called the Reserved Investor Fund (Contractual Scheme) (RIF). Designed to meet industry demand, the RIF provides a UK-based unauthorised contractual scheme with lower costs and greater flexibility than the existing authorised contractual scheme. RIFs, being unauthorised, can accommodate a wider range of assets and investment strategies, especially attractive for commercial real estate investment. Benefits include SDLT exemptions on unit transfers and access to seeding relief, making RIFs advantageous over other structural options for UK real estate. RIFs will be open to professional and institutional investors.
• Minor amendments will also be made to the Co-ownership Authorised Contractual Schemes (CoACS) to maintain tax transparency, allowing multiple investors to pool assets while being treated as if they own the underlying investments directly.

6. Corporate Tax Roadmap

• The government’s Corporate Tax Roadmap highlights several key features, including a cap on the Corporation Tax rate at 25%, maintenance of the Small Profits Rate and marginal relief, and support for capital allowances such as Full Expensing and the Annual Investment Allowance. The roadmap also promises continued Structures and Buildings Allowance and capital allowances for main rate and special rate plant and machinery. Additionally, a consultation will be launched in Spring 2025 to assess the effectiveness of Land Remediation Relief.

7. Non-Resident SDLT Surcharge

• Although the Labour Manifesto proposed increasing the SDLT surcharge for non-residents purchasing UK residential property from 2% to 3%, the Autumn Budget did not address this increase. Further updates on this potential change are anticipated.

8. Inclusion of Pensions in Inheritance Tax (IHT)

• One of the significant changes in the Autumn Budget 2024 is the plan to include pensions within the scope of Inheritance Tax (IHT) from 2027. Previously, pensions were largely shielded from IHT, making them a popular tool for wealth preservation and intergenerational planning. Under the new rules, pensions will form part of an individual’s taxable estate, potentially leading to higher IHT liabilities for beneficiaries. This shift requires high-net-worth individuals to reassess their estate planning strategies, potentially exploring other tax-efficient vehicles to protect wealth for future generations. Consulting with financial advisors will be crucial to navigating this change and mitigating its impact on legacy planning.