Autumn Statement unveils council tax, CGT and stamp duty changes

Chancellor Jeremy Hunt warned tough times were coming ahead of his Autumn Statement yesterday and agents were left with plenty to contemplate from the latest fiscal update.

In an Autumn Statement aiming to balance tax rises and spending cuts, there is plenty that may affect homeowners, buyers and sellers in the property market.

Property related levies such as capital gains tax, council tax and Stamp Duty all got a mention.

Homeowners could face higher local authority bills, after Hunt gave town halls effective powers to raise council tax by up to 5%.

This could hit the property market and influence buying and selling decisions.

Dominic Agace, chief executive of agency franchise network Winkworth, suggested it could push those in larger properties who are struggling with rising bills to move to cheaper areas.

He said: “Homeowners, particularly those in large family homes and living in areas with high levels of council tax will feel the effects of a rise in council tax. 

“This could be deeply unfair on young families, adding to the growing cost of living burdens as they also manage increased mortgage costs.

“A rise in council tax will combine with the effects of rising energy costs and general costs of living, and could be the catalyst for older homeowners to make the difficult decision to downsize into smaller properties in a lower council tax band and maybe move to an area with a lower council tax levy.” 

Changes to Capital Gains Tax (CGT) are likely to be of more concern, particularly for landlords already considering exiting the sector.

The CGT allowance will drop from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024. 

Tom Bill, head of UK residential research at Knight Frank, describe this as a further disincentive for landlords.

He said: “It will disproportionately affect landlords of lower-value properties but CGT rates have not been aligned with income tax, so a material drop in demand or a wave of selling is unlikely.

“Landlords have faced a series of tax hikes in recent years but private rented property accounts for one in five of English households.

“At a time when living costs are rising so quickly, policy should remain rooted in economics, encouraging landlords to remain in the sector and keeping downwards pressure on rents.”

Sylvie Harris, director of lettings at INHOUS, added: “For the many landlords who have been planning to dispose of their rental assets due to the raft of legislation and adverse tax changes, the announcement to halve the Capital Gains Tax exemption in 2023 will come as a blow.  

“This news will make it less favourable for landlords to sell and they will likely continue to let their properties until the conditions improve.  However, tenants will benefit as there is already a shortage of rental properties available on the market.”

One of the more surprising announcements was that the Stamp Duty cuts revealed in the disastrous mini-Budget of September will be reversed.

Former chancellor Kwasi Kwarteng had increased the point at which Stamp Duty is charged on property purchases from £125,000 to £250,000 for home movers. 

The threshold for first-time buyers also increased from £300,000 to £425,000 and can be used on purchases worth up to £625,000.

But despite last month saying these changes would remain, Hunt yesterday revealed that he will “sunset the measure” from 31 March 2025.

Bill added that this now means buyers are in a 28-month stamp duty holiday. 

He said: “It may help stimulate activity closer to the deadline but it appears to contradict the message sent by the Government during the pandemic that a liquid housing market was good for social mobility and had wider economic benefits.”

Richard Donnell, executive director of research at Zoopla, said the reversal signifies a need to reform Stamp Duty.

He described it as “a tax that is now starting to resemble income tax where it's the top tax bands generating the greatest receipts.”

Donnell said: “This reversal will make it increasingly difficult for prospective first-time buyers to get on the housing ladder in the coming years, particularly in London and the South East which accounts for the majority of stamp duty receipts."

Rightmove’s property expert Tim Bannister said he doesn’t foresee a significant number of people bringing their plans forward to 2023, especially due to current affordability challenges, but suggested there may be a jump in new sellers towards the end of next year and into 2024.

He said: “The total time it takes to buy and sell a property is currently around six months, meaning people will need to be well on their way by late summer 2024.

“It’s likely to be most challenging for first-time buyers with smaller deposits, as we know it’s currently taking them an average of five years to save up enough for a deposit. 

“The average monthly mortgage payment will be lower if they’re able to raise a bigger deposit, so we may see more people looking to friends and family for help with a deposit to be able to bring their plans forward before the current Stamp Duty savings disappear in 2025.

“However, the current savings are lower than the Stamp Duty holiday of 2020, so we don’t foresee the removal having a significantly dampening effect in 2025, with factors such as mortgage rates and house prices likely to have a much bigger impact on activity levels.”

John Halman, executive chairman of Cheshire estate agency Gascoigne Halman, took a more positive approach, suggesting it could bring an uptick in enquiries for agents.
He said: “It will certainly provide added impetus for would be first time buyers to get on the property ladder before March 31st 2025. 

“Equally, second steppers and those in the middle of the market who were perhaps casually considering a move in the next five years, may now turn their attentions to an earlier sale and thus free up some entry level stock.”

 Nathan Emerson, chief executive of agency trade body Propertymark, added: "Our member agents say the raised Stamp Duty threshold has had a positive effect on the confidence of their buyers and sellers, so we’re naturally disappointed it will be phased out by 2025. 

“Stamp Duty is not only a barrier to entry to the property market, it restricts downsizers from releasing much needed family homes for second steppers. Bands that better represent house price growth and affordability are key to keeping the market moving.”