The five key takeaways of the mini budget for the real estate and construction sector

1. IR35 reform reversal 

Although it was announced that the IR35 rules will remain for suppliers, the reversal of the 2021 and 2017 changes reduces admin, uncertainty and risk for large real estate and construction groups looking to use contractors or consultants. However, it should be noted the IR35 rules will remain for contractors providing their services through a personal service company.

2. Dividend and company tax

Starting April 2023, dividend tax rates will fall by 1.25%, following the reversal of the increase in employers and employees national insurance rates that took effect from April. The planned increase of corporation tax from 19% to 25% from April 2023 has also been cancelled. This means more money can be left in the business for those people to earn the same money, which could be reinvested in the business having the potential to drive productivity and innovation in the sector.

3. Investment Zones

38 ‘investment zones’ have been announced, where a real estate or construction business constructing or managing property in these areas won’t be subject to taxes such as stamp duty land tax, business rates or employers’ national insurance (for those earning under £50,270).  Investment zones will sit alongside freeport sites, creating opportunities for developers while improving infrastructure for an area, which will translate into longer-term economic opportunities for both the sector and businesses in the area.

4. Stamp Duty 

Stamp duty will no longer be charged on the first £250,000 of a property's price, and first-time buyers won't have to pay any stamp duty on the first £425,000 of a property's price, provided that the property costs less than £625,000.  This has the potential to impact the number and type of homes that house-builders decide to build, with potentially more homes being built for first-time buyers.

5. The Indirect Consequences 

The turbulence of  sterling versus other currencies (in particular the dollar) and the prospect of further interest rate rises could outweigh the tax savings. The increasing cost of importing construction materials, wage inflation and increased domestic borrowing costs could adversely impact the real estate and construction sector. 

However, a depreciation of sterling could result in a spike in foreign investment in UK real estate.

Looking for more information? 

If you have a query about any of the topics mentioned in this article, please fill in the form below and one of our experts will be in touch.