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News – 19.12.24

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How the Budget affects the real estate and construction sector

After months of speculation the Budget was, perhaps, less dramatic than the build-up - although with the pre-budget leaks and announcements there wasn’t much space for surprises.

With the pre-announced tax changes being the main news of the day, we’ve set out the top five tax changes that will impact the real estate and construction sector.

1. Employers’ National Insurance

As was pre-announced, the rate of employers’ national insurance has increased from 13.8% to 15%. In addition, the government reduced the threshold at which employers’ national insurance contributions are made from £9,100 to £5,000 (this reduction adding £615 to annual staff costs for each employee).

While there was some softening for smaller employers the increase in employers’ national insurance will add to costs for many businesses but particularly labour-intensive sectors, like construction. It will also drive incentives for avoidance of employers’ national insurance. In preparation, the government announced anti-avoidance measures and increased funding for HMRC to investigate off-payroll workers and IR35 reviews.

About the author

Liam McKeevor

+44 (0)20 7556 1244
mckeevorl@buzzacott.co.uk
LinkedIn

With the pre-announced tax changes being the main news of the day, we’ve set out the top five tax changes that will impact the real estate and construction sector.

1. Employers’ National Insurance

Capital Gains Tax

2. Capital Gains Tax

As was expected, Capital Gains Tax rates have increased. The new rates are:

	Old rate	New rate	Effective date
Residential property (higher rate)	24%	24%	No change
Carried interest	28%	32%	From April 2025 with plans to bring taxation of carried interest within the income tax framework, with “bespoke rules to reflect its unique characteristics”
Business asset disposal relief ("BADR" - a tax on first £1,000,000 of qualifying gains)	10%	18%	Rate being phased in. To increase to 14% from 6 April 2025 and 18% from 6 April 2026
Other gains basic rate	20%	24%	From 30 October 2024
Other gains main rate	10%	18%	From 30 October 2024

The increases are less steep than was speculated, although the rise in the rates of BADR will impact business owners selling their business. The proposed changes to the rules around the taxation of carried interest will cause concern to investors and those involved with property fund structures. Careful tax planning is advised to ensure your real estate venture is strategically structured from the beginning.

Stamp duty Land Tax (“SDLT”)

3. Stamp duty Land Tax (“SDLT”)

SDLT has increased for residential property investors with the ‘Additional Dwellings’ surcharge increasing from 3% to 5% from 31 October 2024.

Non-dom regime

4. Non-dom regime

The removal of the non-domiciled regime was confirmed. While UK real estate is broadly subject to UK tax regardless of the residence of the owner, there is a risk that the changes will lead to an exodus of non-domiciles from the UK and potentially the investment they bring as well.

Business rates

5. Business rates

Plans to reform business rates were announced, but changes will be made with a stepped approach. The immediate announcement was to provide a relief to retail, hospitality and leisure businesses of 40% (with a cap of £110,000) in the 2025-26 tax year.

Opportunity from spending

The Chancellor announced some significant increases in capital spending which should provide opportunities for the sector. In addition, a corporate tax roadmap published alongside the Budget documents gives some certainty on corporation tax and associated reliefs. There is also mention of “Developing and consulting on a new process that will give investors in major projects increased advance certainty”, although the roadmap gave limited details of how this might work.

Further insight on the Budget

You can read further insight on the Budget and how it may affect your finances in our Autum Budget review: Autumn Budget 2024: Were promises fulfilled or broken?

For more information about how your real estate or construction company is affected by the outcomes of the Budget, complete the form below and one of our experts will be in touch.