Autumn Budget 2024: stamp duty and other impacts on Real Estate

Specialist commercial property solicitor, Rosanna Clark, takes a look at the changes announced in the Autumn Budget affecting stamp duty and other areas of the real estate industry.

The Chancellor’s recent budged introduced significant measures focused on housing, planning reform, tax adjustments and infrastructure investments. These announcements signal shifts for the real estate industry, from tax increases on second homes to new funding for affordable housing and planning system improvements.

Below, we have summarised the principal measures that real estate investors, developers, landlords and business property owners need to understand.

Investors

• Increase in Stamp Duty Land Tax (SDLT) for non-primary residences. From 31 October 2024, the additional dwellings surcharge for second homes, buy-to-let properties, and residential purchases by companies will rise from 3% to 5%. This increase aims to benefit first-time buyers and home movers by freeing up housing stock that might otherwise be purchased for investment.
• SDLT rate for corporate buyers acquiring residential properties worth over £500,000 has risen from 15% to 17%, also effective from 31 October 2024. This adjustment may curb corporate investment in high-value properties, potentially easing competition for other buyers. However, for existing and prospective landlords, these SDLT increases could result in tighter profit margins and potentially deter new investments in the private rental market, which is already facing challenges from rising mortgage costs and anticipated reforms in the Renters' Rights Bill and Energy Standards Efficiency reforms.
• During 2025 - 2026, charges under Annual Tax on Enveloped Dwellings (ATED) will rise by 1.7%. This measure affects corporate entities and investment structures that own residential property through "enveloped" entities, potentially impacting larger investors who hold residential properties within corporate structures.
• The government will press ahead with the Reserved Investor Fund (RIF), introducing lower cost and more flexibility than the existing contractual scheme, which will be open to professional and institutional investors and is expected to enhance investment opportunities in commercial real estate.
• The budget confirmed that the tax regime for Furnished Holiday Lettings (FHL) will be abolished in April 2025, removing the tax advantages for short-term property rentals. This decision comes in response to concerns about the FHL regime’s impact on local housing availability, particularly in tourist-heavy areas where short-term rentals have led to housing shortages. This shift may increase the number of properties available for long-term residential use and ease the strain on housing in popular holiday regions.

Landowners

• While the budget announced increases to the main Capital Gains (CGT) rates, the CGT rates for residential property remain the same. This measure provides some stability for investors in residential properties, as additional tax burdens on CGT could have further discouraged investment in a sector already dealing with heightened SDLT. This relief indicates the government’s acknowledgment of the real estate sector’s delicate balance amidst inflation and high financing costs.
• Come April 2026, there will be major changes to Inheritance Tax (IHT), particularly affecting owners of agricultural land. Agricultural Property Relief (APR) and Business Property Relief (BPR) will be significantly reduced. APR will now extend to environmental land management and will be tapered across combined agricultural and business property. We expect that agricultural and business owners will be impacted by these changes, with APR and BPR allowances to no longer be transferrable between spouses. These changes underscore the government’s intent to encourage sustainable land use and conservation practices, though they will most certainly complicate estate planning for farming families in an already pressured industry.

Developers

• A significant focus of this budget is on reforming the planning system to expedite housing development and infrastructure projects, in summary:
  • To further support the housing market, the budget announced £3 billion in housing guarantees for small and medium-sized enterprises (SMEs) and the Build to Rent sector, facilitating low-cost financing and investment for developers, as well as supporting the delivery of tens of thousands of new homes.
  • An additional £500 million was allocated to the Affordable Homes Programme. This funding aims to create up to 5,000 new affordable homes, addressing critical shortages in the housing market.
  • The government plans to respond to the National Planning Policy Framework (NPPF) consultation by the end of the year, followed by the introduction of the Planning and Infrastructure Bill early next year.
  • To support local planning authorities, the government announced a £46 million fund for recruitment, training, and resources aimed at expediting the approval of major projects.
  • £47 million will go to the Local Nutrient Mitigation Fund Round 2 to help housing projects delayed by nutrient neutrality issues in environmentally sensitive areas.
  • £5 million has been allocated to streamline and enhance the Nationally Significant Infrastructure Projects regime, with investments in green energy and infrastructure intended to boost long-term economic growth.

Businesses

The budget includes several measures targeted at the high street and small businesses. From April 2026, retail, hospitality, and leisure (RHL) properties with rateable values under £500,000 will benefit from permanently lower business rate multipliers. For properties above this threshold, a higher multiplier will apply, with revenue from this increase allocated to support the RHL sector. For 2025-26, RHL properties will receive a relief on business rates, covering 40% of bills up to £110,000. However, this cap applies per business rather than per property, which may disproportionately impact larger businesses with multiple locations. In addition, the small business multiplier will be frozen for 2025-26.

Comment

Overall, the government’s latest budget reflects a focus on housing and planning reform, aligning with high-profile commitments to “Get Britain Building.” The additional funding and planned reforms should help address delays in the planning process and support affordable housing projects, an encouraging step for developers and stakeholders. We will wait to see to what extent these measures will speed up project approvals and enable a faster supply of new homes.

While there was no increase in CGT for residential property, the private rental market faces challenges from the SDLT increase on second homes, potentially deterring new landlords. This could impact rental stock, and over time, affect rent prices and housing availability.

Business rate relief for RHL properties provides limited support to smaller businesses, though industry experts argue that the current business rate structure remains outdated. The government has pledged a commitment to reform, but whether it will happen quickly enough to prevent high street struggles remains to be seen.

Holmes & Hills LLP deal with all aspects of commercial and residential real estate and have an expert team of commercial property, development and planning lawyers. If you have any questions regarding the changes outlined in the 2024 Autumn Budget and how it may affect you and your business , please contact us.