UK Autumn Budget 2025 – Real Estate

The key real estate related announcements are as follows:

 

Construction Industry Scheme (CIS)

From April 2026, new measures will be introduced to tackle supply chain fraud within the CIS. Where HMRC can demonstrate that a business knew, or should have known, it was party to a transaction connected with fraudulent tax evasion, HMRC will be empowered to:

• Immediately cancel Gross Payment Status (GPS), with the reapplication time limit extended to five years;
• Hold the business liable for the lost tax arising from the fraudulent transaction; and
• Impose a penalty of 30% of the lost tax on the liable business, as well as on its directors and other connected persons.

Businesses operating within the construction sector are expected to undertake due diligence and review their CIS compliance processes.

 

High Value Residential Property Council Tax Surcharge

From April 2028, owners of residential properties valued over GBP2 million (as assessed by the Valuation Office) will be subject to an annual surcharge, in addition to existing council tax liabilities. The surcharge will be structured in four bands, starting at GBP2,500 for properties valued between GBP2 million and GBP2.5 million, rising to GBP7,500 for properties valued above GBP5 million (as at 2026 prices). A consultation on the implementation of this charge is expected in the new year.

While the broader market impact remains to be seen, it is anticipated that fewer than 1% of properties will be affected, with a disproportionate impact on London and the South East.

 

Dividends, Savings & Property Income Tax Rate Increases

• Dividends: From April 2026, the ordinary and upper rates for dividend income will increase by 2%, to 10.75% and 35.75% respectively. The additional rate remains at 39.35%.
• Savings Income: From April 2027, income tax rates for savings income (interest) will rise by 2%, to 22%, 42%, and 47% for the basic, higher, and additional rate bands respectively.
• Property Income: Most relevant to the real estate sector, from April 2027 a new, separate income tax rate for property income will be introduced: 22% (basic), 42% (higher), and 47% (additional). This continues successive government policy directions of reducing returns to private landlords. This new property income tax rate will increase the withholding tax on property income distributions from REITs and PAIFs from 20% to 22% – and also apply to withholding under the non-resident landlord scheme. Whilst the latter is usually managed through clearance with HMRC, an increase in withholding tax rates on distributions from certain fund structures may decrease some of their appeal for investors that cannot access more beneficial rates of withholding under double tax treaties or domestic exemptions.

 

Capital Allowances

From 1 April 2026, the main rate of writing-down allowances will be reduced from 18% to 14%. This applies to items qualifying as “fixtures” within buildings (and not eligible for “full expensing”), effectively reducing the annual tax relief for those assets by 4% per year.

 

Miscellaneous Changes

Finally, whilst not all directly related to real estate, the following changes are worth noting.

1. Tax transparency on real estate: the government intends to participate in a new international agreement to tackle tax evasion by providing for the automatic exchange of readily available information on real estate from 2029 or 2030. Whilst little further information has been released on this today, it is likely a reference to the OECD's July 2024 report on the tax transparency of real estate, and perhaps represents an increased focus on the transparency and scrutiny of ownership of UK real estate assets.
2. Business rates: From 1 April 2026, business rates in England will be updated to ensure that the rateable values of properties remain in line with market changes and accordingly the small business multiplier and standard multiplier will be reduced, with permanently lower rates for those in the retail, hospitality and leisure sector. Rates for properties with rateable values of GBP500,000 and above will be increased.
3. Cash ISAs: From April 2027, the annual cash ISA limit for under-65s is set to reduce to GBP12,000, and whilst the overall annual ISA limit of GBP20,000 will remain, under 65s will need to access this higher limit by investing in stocks and shares ISAs.

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