As the dust settles on Wednesday’s Budget, we sense that Rachel Reeves may just have found a middle ground between her party’s ideology and the reality that wealthy families (domestic and international), private equity principals and pioneering entrepreneurs are a vital life source for the future growth of the country. For now, our view – and having consulted in the last 48 hours with the very best amongst the private client advisor community – is that she has gone a long way towards stemming the tide of those thinking of leaving the UK.
Since the content of this pivotal Budget was largely in line with expectations, or in some cases better than commentators had feared, we foresee that London’s prime residential markets will react favourably in the coming weeks. In fact, the clarity and certainty brought by the announcements will likely act as a fillip to the market, which has been holding its breath somewhat since the General Election earlier this year. This has already been demonstrated in the last 48 hours with over £120m of properties over £5m having exchanged in central London.
Stamp Duty Land Tax (“SDLT”)
In their manifesto, Labour pledged to increase the SDLT surcharge for non-resident buyers by 1%, taking the effective rate from 2% to 3%. However, in the Budget they have abandoned this proposal and instead opted to raise the SDLT surcharge applied to second homes from 3% to 5%. Whilst the overall result of this increase is higher than expected (2% instead of the previously announced 1%), the shift in the focus from residency to second homes ensures that these increases will now apply to the majority of buyers of high value homes in London, both residents and non-residents.
We anticipate that this latest increase in SDLT will have a cursory impact on the market whilst sellers adjust to sharing the burden by absorbing some of this increase in their achieved sales prices. However, the rise is not significant enough in the context of overall transaction sizes to prevent a wealthy buyer from ultimately securing the home they want.
What next for the ‘non-doms’?
At last, the Chancellor has published draft legislation which enables advisors to give definitive advice to clients on the non-dom replacement regime. The rules laid out for the new Foreign Income & Gains (“FIG”) regime broadly reflect those proposed by the Conservatives in the Spring Budget ahead of this year’s General Election campaign. New arrivals will not be taxed at all on foreign income and gains for the first 4 years of residence and whilst the time periods would ideally have been extended, the new regime has generally been well received by inbound clients, especially those with burgeoning UK businesses.
Meanwhile, inheritance tax (“IHT”) will not be applicable until individuals have been tax resident for 10 years and good news was received in the form of a phased application from 3-10 years of the widely feared ‘10 year tail’. Similarly, one of the major concerns voiced by the private client community was that existing excluded property trusts would lose the exemption they currently enjoy from IHT, with the Chancellor vowing to bring them within the regime in her pre-Budget manifesto. Very importantly however, whilst she has followed through with her pledge to include these trusts within the IHT regime, we understand that whilst (for long term resident settlors) they will become subject to periodic IHT charges (currently 6% every 10 years), existing trusts will not become subject to the full 40% on death. If that is the case, then some of the community’s worst fears about an exodus of wealth from London may well have been averted.
CGT on carried interest
Similarly, the announced increase to the applicable rate for carried interest for private equity principals from 28% to 32% (from 6 April 2025) has landed reasonably well. This is lower than some had feared and, whilst further reform is promised in 2026, we understand that this position very much remains within the range seen amongst the UK’s European competitors and the East & West coast U.S. States.
Forward thinking
So, whilst many of the headlines leading up to the Budget would have had us believe that the wealthy are leaving London in their droves, our experience, and that of so many of the leading professional advisors that we work with, is that the numbers are so much smaller than the commentary would suggest. Indeed, we are asked frequently whether the market is suddenly awash with new properties to buy since so many folks are leaving our shores. The truth is we haven’t seen a palpable increase in stock levels at all in recent months and, on the ground, good stock remains typically constrained.
We hear anecdotally from the leading selling agents that they have been called in to provide property sales valuations more frequently ahead of this week’s Budget announcement. However, these visits have not translated in to live sales mandates and, in our experience, where certain families have already decided to leave for warmer climes, they intend to hold on to their London homes and enjoy all that London has to offer within the constraints of counting their days.
Given that it takes time to find and acquire wonderful homes, we suspect that we won’t see the transactional data change until Q1 2025. However, we move forward now with renewed clarity and positivity that Q4 may well be the most active period of this fascinating year.
Next stop, the US elections!
As the dust settles on Wednesday’s Budget, we sense that Rachel Reeves may just have found a middle ground between her party’s ideology and the reality that wealthy families (domestic and international), private equity principals and pioneering entrepreneurs are a vital life source for the future growth of the country. For now, our view – and having consulted in the last 48 hours with the very best amongst the private client advisor community – is that she has gone a long way towards stemming the tide of those thinking of leaving the UK.
Since the content of this pivotal Budget was largely in line with expectations, or in some cases better than commentators had feared, we foresee that London’s prime residential markets will react favourably in the coming weeks. In fact, the clarity and certainty brought by the announcements will likely act as a fillip to the market, which has been holding its breath somewhat since the General Election earlier this year. This has already been demonstrated in the last 48 hours with over £120m of properties over £5m having exchanged in central London.
Stamp Duty Land Tax (“SDLT”)
In their manifesto, Labour pledged to increase the SDLT surcharge for non-resident buyers by 1%, taking the effective rate from 2% to 3%. However, in the Budget they have abandoned this proposal and instead opted to raise the SDLT surcharge applied to second homes from 3% to 5%. Whilst the overall result of this increase is higher than expected (2% instead of the previously announced 1%), the shift in the focus from residency to second homes ensures that these increases will now apply to the majority of buyers of high value homes in London, both residents and non-residents.
We anticipate that this latest increase in SDLT will have a cursory impact on the market whilst sellers adjust to sharing the burden by absorbing some of this increase in their achieved sales prices. However, the rise is not significant enough in the context of overall transaction sizes to prevent a wealthy buyer from ultimately securing the home they want.
What next for the ‘non-doms’?
At last, the Chancellor has published draft legislation which enables advisors to give definitive advice to clients on the non-dom replacement regime. The rules laid out for the new Foreign Income & Gains (“FIG”) regime broadly reflect those proposed by the Conservatives in the Spring Budget ahead of this year’s General Election campaign. New arrivals will not be taxed at all on foreign income and gains for the first 4 years of residence and whilst the time periods would ideally have been extended, the new regime has generally been well received by inbound clients, especially those with burgeoning UK businesses.
Meanwhile, inheritance tax (“IHT”) will not be applicable until individuals have been tax resident for 10 years and good news was received in the form of a phased application from 3-10 years of the widely feared ‘10 year tail’. Similarly, one of the major concerns voiced by the private client community was that existing excluded property trusts would lose the exemption they currently enjoy from IHT, with the Chancellor vowing to bring them within the regime in her pre-Budget manifesto. Very importantly however, whilst she has followed through with her pledge to include these trusts within the IHT regime, we understand that whilst (for long term resident settlors) they will become subject to periodic IHT charges (currently 6% every 10 years), existing trusts will not become subject to the full 40% on death. If that is the case, then some of the community’s worst fears about an exodus of wealth from London may well have been averted.
CGT on carried interest
Similarly, the announced increase to the applicable rate for carried interest for private equity principals from 28% to 32% (from 6 April 2025) has landed reasonably well. This is lower than some had feared and, whilst further reform is promised in 2026, we understand that this position very much remains within the range seen amongst the UK’s European competitors and the East & West coast U.S. States.
Forward thinking
So, whilst many of the headlines leading up to the Budget would have had us believe that the wealthy are leaving London in their droves, our experience, and that of so many of the leading professional advisors that we work with, is that the numbers are so much smaller than the commentary would suggest. Indeed, we are asked frequently whether the market is suddenly awash with new properties to buy since so many folks are leaving our shores. The truth is we haven’t seen a palpable increase in stock levels at all in recent months and, on the ground, good stock remains typically constrained.
We hear anecdotally from the leading selling agents that they have been called in to provide property sales valuations more frequently ahead of this week’s Budget announcement. However, these visits have not translated in to live sales mandates and, in our experience, where certain families have already decided to leave for warmer climes, they intend to hold on to their London homes and enjoy all that London has to offer within the constraints of counting their days.
Given that it takes time to find and acquire wonderful homes, we suspect that we won’t see the transactional data change until Q1 2025. However, we move forward now with renewed clarity and positivity that Q4 may well be the most active period of this fascinating year.
Next stop, the US elections!
