The UK’s Autumn Budget 2024 has introduced several updates impacting homebuyers, particularly in the areas of stamp duty, affordable housing, and mortgage support.

One significant change is the plan to end the current stamp duty relief threshold for first-time buyers in March 2025. Currently, first-time buyers don’t pay stamp duty on properties up to £425,000, but this will revert to £300,000, increasing the financial burden for those purchasing above the new threshold. Additionally, the stamp duty surcharge on second homes has risen from 3% to 5%, making property investment more costly for landlords and second-home buyers. This increase aims to support first-time buyers by potentially freeing up more housing stock​

The budget also includes a £5 billion investment in affordable housing to address the UK’s supply shortage. This funding will be directed toward building new affordable homes and improving energy efficiency through the “Warm Homes Plan,” intended to reduce household energy costs. These developments are expected to benefit first-time buyers and low-income families, making affordable options more available in high-demand areas​

Moreover, the Mortgage Guarantee Scheme, which enables buyers to access mortgages with a 5% deposit, is set to become permanent. This is aimed at improving accessibility to homeownership by helping more buyers secure low-deposit mortgages—a boost, especially for younger buyers entering the market​

These budget changes reflect the government’s dual focus on supporting first-time buyers and increasing affordable housing supply. However, the stamp duty adjustments may drive urgency for first-time buyers aiming to purchase before thresholds revert.

What does the budget mean for first time buyers?

The UK’s Autumn Budget 2024 introduces some important considerations for first-time homebuyers, affecting affordability, accessibility, and mortgage options:

Stamp Duty Relief Ending in 2025

The budget confirms that the higher stamp duty relief for first-time buyers will end in March 2025. Currently, first-time buyers enjoy zero stamp duty on properties up to £425,000, a threshold set during previous budget changes. When the threshold reverts to £300,000 in 2025, first-time buyers purchasing homes over this amount may need to pay up to £3,500 in stamp duty, making entry into the housing market costlier​

Affordable Housing Investments

The government has earmarked £5 billion for affordable housing initiatives, aiming to increase the availability of lower-cost homes for first-time buyers. This includes plans to build 33,000 new homes, which could help reduce demand-driven price increases and make homeownership more attainable for those on lower incomes​

Permanent Mortgage Guarantee Scheme

The budget also commits to making the Mortgage Guarantee Scheme permanent. This scheme allows buyers to access 95% loan-to-value (LTV) mortgages, meaning they need only a 5% deposit. The scheme provides lenders with government backing, which is particularly beneficial for younger or lower-income buyers who may struggle with higher deposit requirements.

“Warm Homes Plan” for Energy Efficiency

Another budget feature includes investments in energy efficiency through the "Warm Homes Plan." For first-time buyers, this initiative could mean access to newly constructed, energy-efficient homes, ultimately reducing ongoing energy costs—a significant benefit amid rising living costs​.

While the budget contains measures to support first-time buyers, such as affordable housing initiatives and mortgage scheme stability, the end of the current stamp duty relief in 2025 could lead to increased costs. This may drive some urgency among first-time buyers hoping to secure properties before the change takes effect.

First-time buyers might face increased costs with the end of stamp duty relief in 2025

What changes for Stamp Duty on additional homes?

The Autumn Budget 2024 included changes to stamp duty for those purchasing additional properties, such as buy-to-let investments and second homes. Specifically, the stamp duty surcharge for these types of purchases has increased from 3% to 5% of the total property value. This means the new stamp duty bands for additional home purchases are:

• For the portion between £0 - £250,000 - 5% stamp duty
• For the portion between £250,000 - £925,000 - 10% stamp duty
• For the portion between £925,000 - £1.5 million - 15% stamp duty
• For the portion above £1.5 million - 17% stamp duty

This 2% increase in the additional home stamp duty surcharge is expected to further discourage property investment activities and potentially free up more housing stock for owner-occupiers. However, it may also reduce the supply of rental properties, which could put more pressure on rents.

The changes to stamp duty on additional homes continue the government's efforts to favour first-time buyers and primary residences rather than investment properties.

What will happen to Capital Gains Tax?

In addition to the stamp duty and affordable housing updates, the Autumn Budget 2024 also included changes to the capital gains tax regime. The chancellor announced an increase in the capital gains tax rates for lower-rate taxpayers (those earning under £50,270 annually) from 10% to 18%, and for higher-rate taxpayers (over £50,270) from 20% to 24%.

However, it's important to note that the capital gains tax rates specifically for residential property sales will remain unchanged at 18% and 24% respectively. This means that while the general capital gains tax burden has increased, the rates homeowners and property investors will pay upon selling their homes have been untouched.

According to the chancellor, Rachael Reeves, "This means the UK will still have the lowest capital gains tax rate of any European G7 economy." The decision to keep property-related capital gains tax rates stable is likely an effort to avoid further discouraging home sales and investment in the UK housing market.

These budget changes reflect the government's dual focus on supporting first-time buyers and increasing affordable housing supply. However, the stamp duty adjustments may drive urgency for first-time buyers aiming to purchase before thresholds revert in 2025. Overall, the measures aim to address affordability, accessibility, and energy costs for homebuyers, particularly first-time buyers and lower-income families, while discouraging investment in additional properties.