What does the Budget mean for the Real Estate sector?

Richard Ellard, Head of Real Estate at Thomson Snell & Passmore gives his reaction to the 6 March Budget.

“The Chancellor’s most recent Budget included a range of announcements which will impact on the Real Estate sector. Those with portfolios of residential properties in particular will be affected. While on one hand they may welcome the news that the higher rate of CGT for residential property disposals will be cut from 28% to 24% to encourage landlords and second home-owners to sell their properties, they may be disappointed by the fact that Multiple Dwellings Relief will be abolished from June after showing no evidence of promoting investment in the private rented sector. In addition, those who have portfolios of properties used for holiday lets will be impacted by the fact the Government will abolish the Furnished Holiday Lettings tax regime, eliminating the tax advantage for landlords who let short-term furnished holiday properties over those who let residential properties to longer-term tenants. This will take effect from 6 April 2025 and draft legislation will be published in due course.

“There were also announcements which are likely to be of interest to landowners and developers. In particular, the news that the Government is launching round two of the Local Nutrient Mitigation Fund, which will support delivery of 30,000 homes by 2030 that would otherwise be stalled due to high levels of nutrient pollution. In addition, in order to boost capacity in the planning system, the government is committing £3 million to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities.

“The Chancellor also announced that, following consultation, the Government will extend the existing scope of agricultural property relief from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies. The Government will also establish a joint HM Treasury and HMRC working group with industry representatives to identify solutions that provide clarity on the tax treatment of ecosystem service markets.

“The immediate reaction from the industry demonstrates a slight sense of frustration, with the feeling that an opportunity to reinvigorate the Real Estate industry has been missed. Mike Burton, land director at Metis Homes, said the budget was “rather disappointing” and “did very little for the housing industry as a whole”. Melanie Leech, chief executive, British Property Federation, said:

“There’s little in today’s Budget for the property sector to cheer about. Further devolution deals are welcome as are the announcements of support for delivering more homes in a small number of places, but this falls far short of a bold strategy for delivering the homes needed across the country.”

“As always, the longer term roll out and impact of the changes announced today remains to be seen, but there is certainly plenty for those in the Real Estate sector to digest and act on in due course.”

Nick Hobden adds: “Significant tax cutting measures were aimed at working families, encouraging them to work more to ‘make work pay’, as Mr Hunt repeated during his speech. He has introduced another 2% reduction in employee national insurance contributions, to come into force in April making a total of 4 percentage points’ worth of reductions since January, equating to an average of £900 more cash in families’ pockets for 2024. However, for employers facing rises to the National Living Wage rates from April, they will not see the upside of this tax reduction.”