The five key takeaways of the Autumn Statement for the real estate and construction sectors

1. Stamp duty 

Stamp Duty Land Tax (“SDLT”) reductions announced at the ‘mini budget’ will be temporary and are due to reverse on 31 March 2025. As a result, the SDLT thresholds will reduce with the 0% SDLT only applying on the first £125,000 (from £250,000) of a property's price from 31 March 2025. Similarly, the threshold for which first-time buyers won't have to pay any stamp duty will fall to £300,000 (currently £425,000) provided that the property costs less than £500,000 (currently £650,000). These (now temporary) stamp duty reductions may provide some support to the residential property market, as it may encourage more first-time buyers. This positive impact is offset to a degree by the rise in interest rates, inflationary increases, and the affordability of mortgages.

2. IR35 reform reversal

As part of the mini-budget reversal, the off-payroll working rules changes introduced in April 2021 will not now be repealed. This will mean medium and large businesses will continue to need to review and take action on contractor engagements. Accordingly, the administrative burden and risk to these businesses remain.

3. Income, tax bands, dividends, and corporate tax

Corporate tax will rise to 25% (from 19%) from April 2023. Income tax bands and allowances will be frozen until May 2028. The level at which the top 45% additional tax rate will apply has been reduced to £125,140 from April 2023 (down from £150,000 currently). Dividend tax rates will no longer be reduced and will remain at current rates, being:

The current dividend allowance (which taxes dividends at 0%) is also being reduced to £1,000 (from £2,000) from 6 April 2023.

The impact of these changes is an overall increase in tax on both profits and their extraction. Real estate and construction business owners should look to review their dividend and remuneration policies to ensure planning remains appropriate.

4. Capital gains tax

The annual exempt amount for capital gains tax will reduce to £6,000 from April 2023 (currently £12,300) and will further reduce to £3,000 from April 2024. While this will increase the tax burden arising on capital disposals, contrary to expectations, no increases in the rates of capital gains tax were announced, which will be a relief to investors in UK real estate.

5. Investment zones 

The previously announced ‘investment zones’ are still to come into effect but will be refocused. The programme will “catalyse a limited number of the highest potential knowledge-intensive growth clusters”.  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 (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 social and economic opportunities for both the people and businesses who live or operate in the area.

In contrast to the ‘mini budget’, the Autumn Statement sought to reassure markets and map out a return to balanced public finances - as a result, it was one of tax rises, which will impact the real estate and construction sectors.

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