Focus on: real estate taxes

• Lower multipliers for retail, hospitality and leisure properties will apply permanently from 2026-27. This reduction will be funded through a higher multiplier for higher value properties. 

• A freeze on the small business multiplier and 40% relief on retail, hospitality and leisure (RHL) properties will give some much needed support to the ailing high streets and small businesses in 2025-26. But there are significant limitations. The reality of the relief being reduced from 75% to 40% is that RHL properties according to real estate intelligence expert Altus Group will mean an average 140% rise in business rates bills for more than 250,000 high street premises in England from April 2025.

• A consultation has started to help co-design a fairer business rates system. The Valuation Office Agency has also set out their next steps towards disclosing more information on business rates valuations to help increase transparency.

• Despite these changes, the feeling amongst some industry experts was that this did not go far enough to ease the financial burden on the high street and there was disappointment Labour did not stand by their previous promises of abolition and replacement of the business rates system.

• It is widely accepted that the business rates system needs a fundamental overhaul and whilst it wasn’t expected in this budget perhaps greater clarity on those plans would have been more assuring for high-street businesses. 2026 remains a long way off for many businesses. 

• With planning reform at the heart of Labour’s agenda, they have promised to ensure a simplified and streamlined planning system with a number of legislative changes via the Planning and Infrastructure Bill which will be introduced to parliament early next year.
• Proposed changes to the National Planning Policy Framework (which sets out planning policy in England), should help greater delivery of new housing and infrastructure projects which would in turn boost investment flows and increase longer term productivity. 
• Funds have also been allocated in the budget to support infrastructure and housing development.
• It is hoped that the creation of the National Wealth Fund will help drive private investment in the UK’s clean energy and growth industries to the tune of over £70 billion.
• Pension fund investment into UK growth assets is also expected to be unlocked by using the Pensions Investment Review (a landmark pensions review to boost investment, increase saver returns and tackle waste in the pensions system) and the British Growth Partnership (a vehicle to attract UK pension funds and institutional investment into venture capital funds and innovative businesses).

• With a promise to build 1.5 million new homes in the next five years, the Budget pledged a £5 billion investment in housebuilding. Together with the consultation on the National Planning Framework, the New Homes Accelerator (a new expert group to help speed up delivery of large-scale housing developments across England) and New Towns Taskforce (an independent expert advisory panel to support the delivery of the next generation of new towns), the government has already kickstarted delivery of its promise. 
• Brownfield passports are also being considered to ensure straightforward and swift approvals are given for the development of suitable projects. 
• A £500m boost to the Affordable Homes Programme (a fund to support the capital costs of developing affordable housing) is hoped will promote housing market stability and aide the building of 5000 additional affordable homes.
• By enabling councils in England to keep 100% of the receipts from sales to reinvest into new housing, it is hoped this will protect existing council housing stock and boost capacity. There was also a commitment to reduce discounts on the Right to Buy scheme and a promised cash injection of £3 billion in the form of a housing guarantee scheme to boost the private housing market and support small and medium business, and the build to rent sector.
• Social housing providers will be given a rent settlement of Consumer Price Index (CPI) plus 1% for the next five years. 
• Whilst the measures to support delivery of more homes are welcomed, some feel that more could have been done if the government is to deliver on its pledge of 1.5m new homes. It was hoped that the abolition of the multiple-dwellings relief announced in Spring would be reversed but that was not mentioned in this budget.

• In order to support the delivery and development of new housing, a number of commitments were made to major transport projects including a rail link between Oxford, Milton Keynes and Cambridge, which will help unlock land for housing across the region and progressing the HS2 Phase One to improve travel links between Birmingham and London.
• Following the findings of the Grenfell Inquiry, £1bn has been allocated in the budget towards the removal of dangerous cladding in the next year. This will provide a boost for the construction industry that will be involved in carrying out the remediation works. 

• The stamp duty land tax rate for second homes will increase from 3% to 5% from 31 October 2024.  This may well lead to less landlords coming into the market and therefore less properties available to rent – and consequently increases in rents themselves.
• The lower rate of Capital Gains Tax charged on assets (other than residential property and carried interest) will be increased from 10% to 18% and the higher rate will increase from 18% to 24% for disposals made on or after 30 October 2024. These changes will impact high net worth individuals and investors, who will now be more likely to pay tax on their investment gains each year in the event they exceed their allowance.
• There was no mention of an extension to current relief for first time buyers which will end next year. At present first-time buyers pay no stamp duty on property purchases up to the value of £425,000. This will fall back to £300,000 on 31 March 2025. On top of the end of the first-time buyer relief for SDLT, the nil rate threshold of £250,000, put in place at the spring 2024 budget until 31 March 2025, will not be extended.  From the 1 April 2025 it will revert to £125,000. 
• These two measures combined are inevitably going to create a spike in transactions running up to that date when buyers will want to complete their purchases in order to benefit from these reliefs. It could also result in a stagnation of the market post 31 March 2025 with fewer buyers coming to the market due to affordability issues, unless a subsequent lowering of interest rates helps redress the balance.  For the new build market, housebuilders may need to react with additional incentives post 31 March.

The Office of Budget Responsibility has already commented that interest rates are likely to remain higher than if the budget had not happened – due to higher than anticipated inflation. That in turn will lead to interest rates being maintained at a higher level for longer.  Higher interest rates of course mean higher mortgage rates.  

Combined with the SDLT changes, this is likely to increase pressure on homeowners from an affordability perspective, particularly for first time buyers.  That said, current mortgage rates are reported to be roughly on a par with where they were before the “mini budget” of September 2022, meaning the starting position is much improved.