All the ways first-time buyers and home movers could be hit in the Budget

FIRST-time buyers and families looking to move home are bracing for a multi-pronged assault in this month’s Budget.

Chancellor Rachel Reeves eyeing up everything from your pay packet to your family home to plug a £35billion black hole in the nation’s finances.

Last week, Nationwide said UK house price growth fell month-on-month in October to 0.3% from 0.5% in September.

It said the market remains broadly stable, but Alice Haine at investment platform Bestinvest warned buyers are taking a “wait-and-see” approach ahead of the Budget amid speculation about property tax changes.

The ideas being discussed paint a bleak picture for anyone trying to save a deposit or move up the ladder. 

From “stealth taxes” that punish pay rises to a nightmare “Mansion Tax” on your own home and soaring council tax bills, here are all the ways you could be left footing the bill.

PUB CRISIS

Hundreds of pubs bust as Reeves’ tax hikes spark highest insolvencies in decade

TOP TIPPLE

The supermarket Irish cream dupe that tastes like Baileys and is 25% cheaper

A final decision on the tax rises will not be made until after November 21, when the Office for Budget Responsibility delivers its latest forecast.

The Budget is scheduled for November 26.

Pay squeeze

Before you can even think about a house, you have to save for it.

But the Chancellor is reportedly looking at plans that would make building a deposit harder than ever.

Income tax thresholds are currently frozen until 2028, which means as your pay rises, more of it can fall into higher tax bands without the bands moving.

This is often called a stealth tax because you pay more tax on pay rises and have less left to save. 

The tax‑free personal allowance has stayed at £12,570 since 2021.

However, the freeze may be extended by two more years to 2030.

It’s estimated that the government would raise an extra £3.4billion in 2028-29 and another £7billion in 2029-2030 from the move.

Freezing the tax thresholds would force millions of workers into paying more tax as their income rises with inflation, through a concept known as fiscal drag.

Quilter estimates people earning £20,000–£40,000 will pay about £214 more in income tax by 2029/30.

Someone on £45,000 faces bigger rises, paying around £317 extra in 2028/29 and £642 in 2029/30.

But that’s not all.

It’s understood that Reeves is mulling adding 2p to income tax, which cut your take‑home pay straight away. 

On a £35,000 salary – roughly the UK average – the annual income tax would increase by £449 to £4,935, up from £4,486.

Higher earners would be hit harder, with anyone on £50,270 or more paying about £754 extra a year.

There are also rumours of a 2p cut to employee National Insurance to offset the rise for working‑age employees.

However, this will still lead to higher tax bills for pensioners and the self‑employed, because they do not pay NI in the same way as employees but do pay income tax.

A pensioner on £35,000 would pay about £449 more a year under the swap.

Nothing will be confirmed until November 26.

Raid on your savings

The cash ISA has long been the default choice for first‑time buyers saving a deposit, but it is now likely in the Chancellor’s sights

These accounts are really popular, as savers can stash away up to a maximum of £20,000 a year tax-free.

On the other hand, with a regular savings account, basic rate taxpayers have to pay tax on their savings if they earn more than £1,000 in interest annually.

Higher-rate taxpayers must pay tax on savings as soon as they earn more than £500 in interest annually.

This is what’s known as the personal savings allowance, which was first introduced in 2016.

However, briefings suggest Rachel Reeves is considering cutting the annual tax‑free cash ISA allowance from £20,000 to £10,000 to nudge savers towards riskier stocks and shares ISAs in the name of boosting growth. 

For would‑be first‑time buyers, that is problematic because a deposit is money you cannot afford to lose and needs to stay in cash.

Investment accounts can fall in value, and advisers generally say you should only use them for money you can leave untouched for at least five years.

If markets were to drop just as you are ready to buy, your pot could shrink and your purchase could unravel. 

Building societies have also warned that there could be a second hit too, because cash ISA balances help fund their mortgage lending.

If that source of money dries up, their costs rise and mortgage rates could edge higher.

Council tax bombshell

Homeowners and movers won’t be spared.

The Treasury is weighing council tax reforms that would raise bills for many households, especially higher‑value homes. 

Options include doubling rates for Bands G and H or adding new bands above them

A Band G bill could rise from about £3,800 to about £7,600, and a Band H bill could rise from about £4,560 to about £9,120. 

The IFS says the plan could raise £4.2billion a year by the end of the decade.

Experts have said the measure would hit older homeowners hardest and could flood the housing market with “for sale” signs.

Lucian Cook of Savills warned asset-rich but cash-poor households would be “at the sharp end of this” policy.

He said that families that had lived in properties for a long period of time would have “seen their assets go up in value, but that doesn’t mean they can be considered to be wealthy”.

Richard Donnell of Zoopla added: “Changes in council tax would likely see some homeowners look to sell to reduce costs, which would further add to supply and impact prices.”

Mansion tax on your family home

There have been discussions about scrapping the long‑standing principle that you do not pay tax simply for living in a high‑value home.

One option is an annual levy on properties worth £2million or more, which would charge 1% on the value above the threshold each year.

For a £3 million home, that would mean a yearly bill of about £10,000.

It could be bad news for downsizers because it may put buyers off.

It would also hit asset‑rich, cash‑poor homeowners who have benefited from big house price rises.

However, if such a measure were introduced, it’s understood the money raised could be used to fund help for first‑time buyers.

That could include scrapping stamp duty for them altogether.

Stamp duty shake-up

Kemi Badenoch said last month that, if the Conservative Party wins the next election, it would scrap stamp duty on people’s main homes. 

Stamp duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.

First-time buyers currently pay stamp duty on properties costing more than £300,000, while home movers pay on properties valued above £150,000.

Rumours are circulating that Chancellor Rachel Reeves may reform stamp duty, funding a potential cut with one of the other housing policies currently being considered.

About £13.9billion was raised in stamp duty in 2024–25 and roughly £4.5billion of that came from people’s main homes.

Rightmove says that in England only 40% of homes for sale are stamp duty‑free for first‑time buyers in 2025.

For home movers, that drops to 5%.

Taxed to sell

The government is also mulling removing capital gains tax (CGT) relief for pricier main homes, according to the Times.

If the proposals are correct, sales of main residences worth £1.5million or more would face CGT.

Right now, nobody pays capital gains tax when selling their primary residence.

Under the mooted rule, once a home sells for more than £1.5 million, you lose the exemption and all the profit is taxed.

The current CGT rates are 24% for higher‑rate taxpayers and 18% for basic‑rate taxpayers.

Everyone can still deduct a £3,000 annual CGT allowance from any gains.

Under this hypothetical rule, once a home sells for more than £1.5million, you would lose the tax exemption and all of the profit is taxed.

For example, if you bought for £500,000 and sell for £1.6million, your profit is £1.1million, and after the £3,000 allowance the taxable gain is £1,097,000.

If you are a basic‑rate taxpayer earning £35,000, only £15,270 of the gain is taxed at 18%, which comes to £2,748.60. The remaining £1,081,730 is taxed at 24%, which comes to £259,615.20.

This means you’d be slapped with a tax bill of £262,363.80 just to sell your property.

And if you are a higher‑rate taxpayer earning more than £50,271, the 24% rate applies to the £1,097,000, giving a £263,280 bill.

How much such a policy this would raise depends on what the value threshold is for homes to be hit by the tax – in the last financial year, the tax raised £13.3billion.

With stamp duty already adding to moving costs, experts say the plan would put older owners off downsizing.

That would mean fewer homes for sale, tighter supply, and higher prices for first‑time buyers.

Sarah Coles, head of personal finance at Hargreaves Lansdown said: “This will leave older people stuck in their homes for life, to avoid tax, rather than downsizing to free up cash for retirement or to move into something that suited their needs better.

ALL CHANGE

Supermarket giant rolls out huge loyalty scheme change nationwide

HOT STUFF

I live in world’s best city 3 hours from UK… it’s warm in winter & buses are free

“It would also mean tax worries could significantly damage their quality of life in retirement.

“For younger people, it would make it more expensive to buy and sell and move up the ladder, so it could be a real brake on property sales and house prices.”