Autumn Budget 2024 – Real Estate

On 30 October we heard the first female Chancellor of the Exchequer deliver her maiden Budget. It was a Budget which promised not to raise taxes for "working people", and as a result speculation about what might be announced today has been rife in the press.

In that light, the announcements were not as extensive as some of the speculation. That said, there were certainly some key announcements in relation to UK real estate taxes, a summary of which is provided below.

 

SDLT: residential property

From 31 October 2024, the surcharge on purchases of second homes and buy-to-let properties will rise from 3% to 5%. This change will also apply to purchases of residential property by non-natural persons. In addition, the single rate of SDLT that is charged on the purchase of individual dwellings costing more than GBP500,000 by corporate bodies will be increased by 2% to 17%.

To note, where contracts are exchanged prior to 31 October 2024 but complete or are substantially performed on or after that date, transitional rules may apply and it may be possible to access the current SDLT rates.

In addition, from 1 April 2025, the threshold at which SDLT will begin to be paid on residential property purchases (other than for first-time buyers) will be reduced to GBP125,000 (currently GBP250,000).

 

Reserved Investor Fund (RIF)

The government has confirmed that it will proceed with the introduction of the Reserved Investor Fund (Contractual Scheme) (RIF) – a new unauthorised UK funds vehicle to promote investment into UK real estate. Legislation will be introduced before the end of the current tax year.

The RIF is intended to fill a gap in the market – introducing a new onshore lower-cost (and unauthorised) alternative to existing fund structures.

 

Corporation Tax

The government has also released a Corporate Tax Roadmap, with the aim of providing a stable and predictable tax environment for businesses in the area of corporation tax. A few of the key commitments in the Roadmap are relevant to those in the real estate sector, including:

• Maintain the generous system of permanent full expensing for this Parliament, allowing companies to write off the full cost of qualifying plant and machinery expenditure on certain assets (which can include certain specific expenditure on fittings within buildings) in the year of investment
• Considering the extension of the full expensing regime to cover assets bought for leasing or hiring
• Maintaining other core features of the UK’s capital allowances regime, including the GBP1m Annual Investment Allowance
• Launching a consultation this year to address concerns over whether capital allowances can apply to predevelopment costs
• Capping the Corporation Tax rate at 25% for this Parliament and maintaining the rates and thresholds for the Small Profits Rate (corporation tax of 19% for companies with profits under GBP50,000) and marginal relief (which reduces corporation tax for companies with profits between GBP50,000 - GBP250,000).
• Consulting on further on reforms to the UK’s rules on transfer pricing, permanent establishments and Diverted Profits Tax, including the potential removal of UK-to-UK transfer pricing, consulting on further changes to transfer pricing legislation, including potentially lowering the thresholds for exemption to bring medium-sized businesses within the scope of the rules, and reviewing the transfer pricing treatment of cost contribution arrangements
• Monitoring international developments with a view to ensuring the UK’s regime remains competitive

 

Business Rates

As well as announcing changes to support the retail, hospitality and leisure sectors, the government has announced its commitment to delivering a fairer business rates system fit for the 21^st century. Accordingly, it is seeking industry engagement in dialogue about future potential reforms.

 

Employer National Insurance Contributions

From 6 April 2025 the rate of employers' NICs will increase from 13.8% to 15%, and the threshold at which an employer becomes liable to pay national insurance contributions (on a per-employee basis) will reduce from GBP9,100 to GBP5,000 per year. However, to support small businesses, the employment allowance (which currently gives employers a discount on NIC bills of GBP100,000 or less) is increased from GBP5,000 to GBP10,500 and the current eligibility threshold will be removed.

 

Miscellaneous

As announced in the Spring Budget, the government will introduce legislation in the next Finance Bill to remove the specific tax treatment for Furnished Holiday Lettings.

Finally, while not directly related to real estate, it's worth noting the following personal tax changes:

• With effect for disposals on or after 30 October 2024, the higher rate of Capital Gains Tax will be increased to 24% and the lower rate to 18%, now aligning the rates with those for disposals of residential property
• From April 2025 (until April 2026), the Capital Gains Tax rates currently applied to carried interest will be increased to 32%
• The rates for Income Tax, Employee National Insurance Contributions and VAT remain unchanged
• Abolition of the UK's 'non-dom' regime, and its replacement with a residence-based regime, will take effect from 6 April 2025
• Changes to Inheritance Tax rules (primarily to reform certain reliefs, and bring unused pension funds and death benefits payable from a pension into a person's estate for IHT purposes from 6 April 2027).

 

Should you have any queries on the Autumn Budget, please reach out to your usual UK tax contact or one of the following.