What the UK Autumn Budget 2024 Means for First-Time Buyers and Home Savers

The UK government’s Autumn Budget is always a major event, carrying particular significance for first-time buyers and home deposit savers. This year’s budget was historic - the first in over a decade from a Labour government and the first ever delivered by a female Chancellor. With rising cost-of-living and a housing crisis, the path to homeownership has never felt more daunting. Yet, with a cautious optimistic eye, we look to this budget for signs of progress - small but meaningful steps that could ease financial strain and make homeownership feel a little closer. Will these proposals bring the boost you need in getting closer to buying that dream home? Let’s dive into what’s changing and how it could impact your future.

1) Stamp duty relief: the countdown begins!

What's changed?

Stamp Duty Land Tax (SDLT) has been a hurdle for many individuals looking to purchase their first home. In September 2022, the Conservative government temporarily increased the nil rate of stamp duty, the amount before you have to start paying stamp duty on a purchase, raising the nil rate for first-time buyers from £300,000 to £425,000. Good news for now - the budget continues the SDLT exemption for first-time buyers purchasing homes up to £425,000, allowing them to sidestep the tax until April 2025. After that, the threshold will revert to £300,000. For homes between £425,000 and £625,000, a rate of 5% will be applied on the amount exceeding £425,000. After April 2025, first-time buyers will have to pay 5% on properties priced between £300,000 and £500,000 on the amount exceeding £300,000.

Why it matters

This reprieve could help those saving for a house deposit, making the cost of buying less daunting in the short term. As an example, first-time buyers purchasing a home costing £500,000 will be paying SDLT of £3,750 until April 2025. Once we enter the next financial year, SDLT rates will shoot up to £10,000. This is a huge savings of £6,250. It means there’s a bit of a ticking clock for potential buyers in high-cost areas to take advantage of the current rate before 2025. So, if you’re on the hunt for a home and you have your finances in place, this could be the perfect time to press “go” on your property search. Rightmove expects to see a rush of first-time buyers, which is likely to push up competition for a suitable property. While saving the extra pounds of stamp duty is beneficial, it is important however not to fall into the trap of making an unhappy purchase.

2) Stamp duty hike for buy-to-let homebuyers

What's changed?

The budget also introduced a higher SDLT rate for second homes, with the existing surcharge increasing from 3% to 5% effective 31 October 2024. With this move, the Chancellor aims to provide an advantage to both new buyers and those moving home and expects 130,000 additional transactions over the next five years.

Why it matters

This measure is intended to disadvantage buy-to-let (BTL) buyers who some view as crowding out property newcomers in a supply constrained housing market. First-time buyers who are saving up for their house deposit could somewhat benefit from fewer people looking to get into BTL property.

3) Lifetime ISA stays the same: a missed opportunity?

What's changed?

Nothing. The Lifetime ISA (LISA) remains a smart option for those under 40 saving for their first home, offering a 25% bonus on up to £4,000 in yearly savings. But with house prices soaring, the £450,000 property cap on the scheme has proven restrictive for buyers in certain geographies. The house price cap has been frozen since LISA’s inception in April 2017. On top of that, there has been a 6.25% withdrawal fine for people who buy above the £450,000 price cap. While the budget didn’t officially raise the cap, there’s been a push to reform the LISA and either raise the cap or remove penalties for buyers needing to exceed it.

Why it matters

If reforms like raising the cap or waiving penalties were introduced, the LISA could truly shine, giving buyers more flexibility to use their savings even in pricier markets. It would give first-time buyers more freedom to shop in areas that might currently feel out of reach. We hope that with mounting calls for reform, the government will step up and address these changes - giving more people the confidence to save into a scheme that is exclusively geared toward homeownership.

4) Inheritance tax: a new era for family wealth?

What's changed?

Inheritance tax (IHT) thresholds are staying frozen for another two years at £325,000 until 2030. Rising wealth including house price inflation means more estates are likely to pay inheritance tax. But the big news here is about pensions. Currently, assets subject to IHT include property, savings, investments, personal items; pensions are excluded. This has led to the well-off to preserve and resist pension withdrawals and instead deplete other savings first and thereby reduce eventual IHT liability.

In an effort to close such loopholes, from April 2027, inherited pensions will be included in a deceased estate and subject to the 40% rate of tax on anything over the £325,000 threshold (£500,000 if the estate includes a property). This is a major shift from the previous tax-free inheritance status and will likely affect anyone planning on relying on inherited pensions as part of their estate planning or future homeownership funds.

Also, starting in April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all. But for assets exceeding this £1 million threshold, inheritance tax will apply with a 50% relief, at an effective tax rate of 20%.

Why it matters

The proportion of first-time buyers receiving help from the Bank of Mum and Dad to secure their home deposits in 2023 was 57%, up 10 percentage points on the previous year. The freeze on the IHT nil-rate band, the plan to tax inherited pensions and changes to agricultural and business property relief could accelerate how much and how quickly older parents decide to gift to their children, not least for contributing towards the children’s house deposit.

5) Boosting affordable housing for first-time buyers

What's changed?

The Affordable Homes Programme has been pivotal in providing lower-cost housing to eligible buyers, including many first-time buyers. Now, with a fresh £500 million injection aimed at building 5,000 new affordable social homes, the government is doubling down on making affordable housing a reality for more people. This funding is part of a massive £5 billion housing boost for 2025-26, all geared toward adding 1.5 million new homes over the next four years.

Why it matters

This could mean real opportunities in areas where demand often overwhelms supply, especially for affordable options. While 5,000 new homes won’t solve the crisis overnight, it’s a meaningful step that could alleviate market pressures and expand access to the starter homes so many are searching for. This investment is a hopeful signal for mortgage newcomers, bringing them closer to their goal of owning a home - though realistically, it’s one part of a larger puzzle that still needs more pieces.

6) Right to Buy discount cuts: a balanced approach

What's changed?

The Right to Buy program has given council tenants the chance to purchase their homes at a discount, but this budget introduces a reduction in those discounts. Instead of prioritising home purchases, the government is keeping more homes in the social housing pool - good news for people looking to rent affordably and for first-time buyers eyeing the market.

Why it matters

Although tenants might not see as steep of a discount, this shift could benefit entry-level buyers by balancing supply in the housing market. With more homes remaining in the affordable housing sector, there is less pressure on prices overall and homes remain accessible for renters and buyers alike. This provides more stability in the market and makes it easier for new homebuyers to find a property without breaking the bank. It is another strategic step toward a more accessible housing market.

7) What's left out

The Autumn Budget left some questions hanging in relation to support for aspiring homeowners who’ve been hoping for a helping hand onto the property ladder. A notable absence was more detail on the widely discussed “Freedom to Buy” scheme, which promises to transform the Mortgage Guarantee Scheme into a more accessible path to homeownership for people with low deposits. This could be a huge boon for those feeling stuck saving for a hefty deposit while paying rent.

The bottom line

The dust has settled on the Autumn Budget 2024, and the verdict is in: the government has taken a decidedly mixed approach to supporting first-time buyers and home savers. On one hand, there are some genuine reasons to be hopeful - the stamp duty raises on buy-to-let, shakeup of IHT tax rules, and the boost to affordable housing construction are welcome changes. But on the other hand, the glaring omissions, like the lack of meaningful Lifetime ISA reform and the uncertainty around the "Freedom to Buy" scheme, have left many feeling frustrated.

Ultimately, the true test will be whether these initiatives can truly make a dent in the housing affordability crisis - a challenge that will require unwavering, multi-pronged action from policymakers. For now, future homeowners must navigate a landscape that is part triumph, part treachery. One thing is crystal clear: the road to homeownership remains a relentless uphill battle, and the government's role in paving the way forward will be scrutinised with eagle-eyed intensity in the years to come.

At Habstash, we’re committed to helping first-time buyers tackle this challenging journey by providing tools and insights to make homeownership more accessible. To try out our platform, sign up to our waitlist and take the first step towards your own home.

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