The five key takeaways of the 2023 Spring Budget for the real estate and construction sectors

2. Capital allowances 

In addition to corporation tax rates increasing, the super-deduction, which has been available on qualifying capital expenditure since April 2021 will also end.

To encourage business investment, the budget announced the super-deduction will be replaced by a 100% first-year allowance for qualifying plant and machinery (with a 50% allowance for special rate expenditure) which will run until April 2026.

3. Investment Zones 

An update was provided on the previously announced ‘investment zones’. There will be 12 zones across the UK with 8 in England. The Government will begin discussions to co-develop proposals with combined authorities in:

• The East Midlands 
• Greater Manchester 
• Liverpool City Region
• The North East
• South Yorkshire
• Tees Valley
• West Midlands
• West Yorkshire 

A real estate or construction business constructing or managing property in these areas will not be subject to taxes such as stamp duty land tax, business rates or employers’ national insurance (on earnings up to £25,000 per year). Investment zones will sit alongside freeport sites, creating opportunities for developers while improving infrastructure for an area, which will translate into longer-term social and economic opportunities for both the people and businesses who live or operate in the area.

4. Real Estate Investment Trusts (REIT) 

Changes are being introduced to the REIT regime as part of the Edinburgh reforms (originally set out on 9 December 2022). These changes relax the requirement for a REIT to hold a minimum of three properties if it holds a single commercial property worth at least £20 million. The March 2023 budget announcement also set out a reduction in the administrative burdens for certain partnerships investing in REITs.

5. Pension taxation 

There was a surprise announcement that lifetime allowance charge on pensions will be removed from April 2023 (and abolished from April 2024).  The annual allowance on pension contributions have increased.

These measures should be of some benefit to owner managers in the real estate and construction sectors. The removal of the lifetime allowance charge may in time increase pension funds value for investment in real estate funds.

If you’d like to find out more about how you or your business should manage the changes, complete the form below and we’ll be in touch.