Reeves’ Proposed Property Tax Changes Raise Concerns for First-Time Buyers

With just about a month to go until the Autumn Budget, speculation is mounting that Chancellor Rachel Reeves could introduce major changes to how property is taxed. But industry voices are warning that this could lead to unintended consequences for first-time buyers.

While these property tax reforms appear to be aimed at those higher up the ladder, experts caution that decisions made at the top of the market often influence supply and pricing further down. If certain measures discourage current owners or landlords from selling, it could restrict the number of homes available to aspiring buyers, making it harder to get onto the property ladder even if upfront costs are reduced.

Scrapping Stamp Duty: One of the Top Property Tax Changes

One of the biggest changes reportedly being considered is scrapping stamp duty for buyers and instead applying it to sellers of homes valued above £500,000. On the surface, this could remove a major affordability barrier for first-time buyers by eliminating a large upfront expense.

However, if sellers, particularly in higher-value segments, choose to delay moving to avoid large exit tax bills, fewer homes could come onto the market. A tighter supply of family homes could reduce the availability of smaller, starter properties further down the chain, ultimately limiting options for beginners, even if the cost of buying appears lower.

Capital Gains Tax Reform & the Impact on Family Wealth

Reports also suggest the government may consider removing the Capital Gains Tax exemption on main residences above a certain threshold. This could discourage older homeowners from downsizing if it results in a substantial tax charge upon sale.

Such a move could also restrict the flow of intergenerational wealth. A significant number of first-time buyers currently rely on financial support from family to fund deposits. If those proceeds are reduced by tax, it could directly affect the ability of future buyers to secure the funding they need.

Changes to National Insurance on Rental Income

Another proposal said to be under consideration is extending National Insurance to rental income. This could increase costs for landlords, potentially leading them to raise rents or exit the market altogether. In the short term, exiting landlords may release more properties for purchase.

However, for those still renting and trying to save a deposit, a reduction in rental supply could push rents higher. Any increase in monthly living costs would make it even harder for first-time buyers to save, further delaying their ability to purchase a home.

Conclusion

While the reported plans appear to primarily target wealthier households and landlords, the housing market’s interconnected nature means first-time buyers could be affected in unexpected ways. Housing supply plays a critical role in affordability and any policy that discourages movement within the market risks limiting the availability of starter homes.

As anticipation builds ahead of the Autumn Budget, the challenge for the government will be balancing tax reform with market stability, ensuring that attempts to make the system fairer do not unintentionally make home ownership less achievable for those entering the market for the first time.