Weekly Briefing: UK house prices to increase in H2 of 2024, Local tech firm secures SpaceX deal, Potential tax changes & BoE rates decision

In this week's briefing we’ll cover new data from Zoopla suggesting a 2% house price increase by the end of 2024,  Filtronic’s second deal with SpaceX in aid of Project Starlink & increasingly likely Capital Gains and Inheritance Tax increases under the new Labour government & Bank of England rates decision.

UK Economy

BoE Rates decision

• The Bank of England (BoE) has decided to ease monetary policy following a drop in inflation back to its 2% target in May and June this year, marking the first time it has lowered interest rates since the emergency rate cut in March 2020.
  
  
• Interest rates had previously been raised from 0.1% in December 2021 to 5.25% by August 2023, maintaining this level for the past year.
  
  
• Today’s rate cut should begin to ease some of the pressure on UK borrowers, the timing of which will depend on how long banks take to pass these lowered rates on to consumers and businesses.
  
  
  

UK Business

Filtronic's New Contract with SpaceX

• Filtronic, a local telecoms tech firm based in Sedgefield and Leeds, has secured a $9 million contract from SpaceX to support the Starlink satellite project, continuing Filtronic's involvement in providing crucial technology for SpaceX's internet satellite constellation.
  
  
• The contract involves Filtronic's E-band solid-state power amplifier (SSPA) modules, which are essential for the Starlink system to deliver high-speed, low-latency internet globally.
  
  
• This new agreement follows a substantial £48 million ($60 million) deal struck in April between Filtronic and SpaceX, which included the potential for SpaceX to become a shareholder in Filtronic.
  
  
• As part of the latest order, an additional 2,171,211 share warrants have been vested, bringing the total to 8,684,844 share warrants, representing 4% of Filtronic's share capital at the time of the agreement.
  
  
• Nat Edington, Filtronic's CEO, expressed delight at the continued partnership with SpaceX, emphasising their significant role in supporting the rollout of the Starlink constellation. The order demonstrates the ongoing demand for their high-quality components.
  
  
• In announcing the original agreement, Mike Nicolls, SpaceX's VP of Starlink Engineering, praised Filtronic as an "outstanding" supplier, highlighting the company's ability to meet Starlink's rigorous demands for high-quality parts.
  
  
• The partnership could also lead to the development of new products specifically designed for the Starlink system, which aims to provide internet access to remote and underserved areas worldwide.
  
  
  

UK Tax

Potential Changes to Inheritance and Capital Gains Taxes

• The Labour government, led by Prime Minister Keir Starmer and Chancellor Rachel Reeves, is poised to implement significant changes to inheritance tax (IHT) and capital gains tax (CGT) in the forthcoming autumn Budget, scheduled for 30 October 2024.
  
  
• Potential changes to IHT include reducing gifting allowances, which would lower the amounts individuals can pass on to their heirs tax-free. Additionally, the £325,000 nil-rate threshold, which has not been adjusted since 2009, may be cut further.
  
  
• Another proposed change involves eliminating the £175,000 main residence allowance, which currently reduces IHT due when passing on a family home to children or grandchildren.
  
  
• Chancellor Reeves is considering imposing CGT on death in addition to IHT, effectively subjecting families to both taxes. This move could raise the effective taxation rate to as high as 54.4%.
  
  
• The Office of Tax Simplification (OTS) had previously recommended removing the CGT "death uplift," which currently spares beneficiaries from paying CGT on inherited assets' gains. This proposal, which was initially prepared for former Chancellor Jeremy Hunt, now presents a tax-raising opportunity for the Labour government.
  
  
• The government is also exploring the possibility of aligning CGT rates with income tax rates. The top CGT rate is currently 28%, whereas the top income tax rate is 45%. Equalising these rates has the potential to raise over £15 billion
  
  
• Another option on the table is reducing pension tax relief for middle-class workers. This measure could involve introducing a 30% tax on pension contributions, raising an estimated £2.7 billion annually.
  
  
• In her upcoming speech, Rachel Reeves is expected to declare Britain "broke and broken," highlighting the severe financial challenges inherited from the previous Conservative government. She is also expected to outline the necessity of difficult fiscal decisions to address a £20 billion deficit in public finances.
  
  
• The possibility of increases in capital gains tax and inheritance tax is very real, posing a significant threat to hundreds of thousands of investors looking to sell stocks, property, cryptocurrency, and other assets. To mitigate these potential tax burdens, investors should consider more tax-efficient options, such as the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).
  
  
  

UK Property

UK house prices to increase in H2 of 2024, say’s Zoopla

• According to Zoopla, house prices in the UK are expected to increase by 2% in the second half of 2024, driven by more people selling their homes. This positive outlook comes as the number of home sales agreed in the four weeks to 21 July was 16% higher than the same period last year, with estate agents having more homes for sale than at any time in the past six years.
  
  
• Buyers are now paying an average of 96.8% of the asking price, the highest percentage in 18 months, equating to properties selling for about £16,600 below their asking price in June 2024.
  
  
• Recent data from the Bank of England showed that net mortgage approvals remained largely unchanged in June, reflecting a stable property market ahead of the general election and an upcoming interest rate decision.
  
  
• The Bank of England's interest rate decision will significantly impact the market in the short term, with rates cut, this could create some positive growth.
  
  
• Richard Donnell, an executive director at Zoopla, said: “The housing market is starting to heat up after a stone-cold 2023. There are clear signs of growing confidence among buyers and sellers with many more homes for sale and buyers paying an increased proportion of the asking price.”
  
  
• “The Bank of England will have more impact on the market in the short term,” he said.
  
  

Final Note

This week's headlines highlight some major tax changes that could potentially be coming our way, forcing investors to take action. 

On a more positive note, we have a strong indication that property prices will continue to rise into the second half of 2024 in light of the recent rate cuts.

Additionally, it's encouraging to see UK businesses, like Filtronic, securing significant contracts with companies such as SpaceX, showcasing the UK's strong position in technology and innovation.

At GCV, we remain committed to providing the latest insights into the investment and wider economic landscape in order to support investors in making well-informed decisions when choosing where to allocate their capital.

If you would like to find out more about a number of tax-efficient investment strategies available to UK investors, discover our range of downloadable resources here.