The Autumn Budget 2024 was set out on 30 October 2024 by Rachel Reeves, with less significant changes to tax than were previously expected.
Despite this, there are a number of changes that will be relevant to the Real Estate sector, which we have outlined below.
Stamp Duty Land Tax: increase to higher rates on additional dwellings
The higher rates for additional dwellings surcharge on Stamp Duty Land Tax (SDLT) will be increased from 31 October 2024 by 2%, resulting in an increase in the rate from 3% to 5%. This surcharge is also paid by non-UK residents purchasing additional property.
This measure is expected to increase the number of transactions by first-time buyers and other people buying a primary residence by 130,000 over the next five years.
Stamp Duty Land Tax: increase in rate for corporate buyers purchasing dwellings
The single rate of SDLT charged on the purchase of dwellings over £500,000 by corporate bodies will be increased by 2% resulting in an increase in the rate from 15% to 17%.
Annual Tax on Enveloped Dwellings (ATED): annual chargeable amounts
The annual chargeable amounts for ATED, a charge payable primarily by companies on UK residential properties they own, will be uplifted by the September Consumer Prices Index figure of 1.7% for the 2025-2026 ATED chargeable period.
Business rates: sectoral multipliers for retail, hospitality and leisure properties
The government intends to permanently lower multipliers for retail, hospitality and leisure properties from 2026-27. This will be paid for by a higher multiplier for properties with rateable values above £500,000.
Abolition of Furnished Holiday Lets tax regime
Legislation will be introduced in the Finance Bill 2024-25 to remove the specific tax treatment and separate reporting requirements for Furnished Holiday Lettings (FHL).
Abolition of the FHL tax regime removes the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties, aligning the tax rules for furnished holiday lettings with those for other property businesses.
This will result in income and gains from a FHL forming part of the person’s UK or overseas property business. These changes will take effect for Income Tax and Capital Gains Tax on or after 6 April 2025 and for Corporation Tax on 1 April 2025.
Reserved Investor Fund and related provisions
The government will introduce the Reserved Investor Fund (Contractual Scheme) (RIF), which will be a new type of UK-based investment fund. The RIF is designed to complement and enhance the UK’s existing funds regime by meeting industry demand for a UK-based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme.
The RIF being an unauthorised fund means that it is open to a wider range of possible assets and investment strategies than an authorised fund. The RIF scheme provides the ability to transfer units in a RIF without any liability to SDLT and provides access to seeding relief. These factors provide advantages to RIFs over existing structural options for UK real estate. The RIF will be open to professional and institutional investors and is expected to be particularly attractive for investment in commercial real estate.
The government also plans to make minor changes to the tax rules in respect of Co-ownership Authorised Contractual Schemes (CoACS), which allow multiple investors to pool their assets in a tax-transparent manner, ensuring that investors are treated as if they own the underlying investments directly.
Secondary legislation will be published before the end of the 2024-25 tax year.
Corporate Tax Roadmap
The government has published a Corporate Tax Roadmap. The primary features of this include: a commitment that the Corporation Tax Rate will be capped at 25%, a maintaining of the Small Profits Rate and marginal relief at current rates and thresholds, as well as key features as such as Full Expensing, Structures and Buildings Allowance, capital allowances for main rate and special rate plant and machinery, and the Annual Investment Allowance.
The government will also launch a consultation to review the effectiveness of Land Remediation Relief in Spring 2025.
Stamp Duty Land Tax – no increase yet to surcharge for non-residents purchasing UK residential property
The Labour Manifesto outlined the plan to increase the SDLT surcharge for non-residents purchasing residential property in the UK from 2% to 3%. This does not appear to have been covered in the Autumn Budget this year and we await confirmation on what is happening on this potential increase.
