A sigh of ‘relief’ for housing associations and landowners – Autumn Budget 2026

New zero-rate of VAT for social housing land

The government intends to introduce legislation, effective from 1 April 2027, allowing land to be sold to registered providers of social housing at the zero rate of VAT.

Currently, the sale of land is generally exempt from VAT, meaning that VAT incurred on related expenditure is irrecoverable. Landowners affected by this issue address it by ‘Opting to Tax’ the land in order that their sales are standard-rated allowing for VAT recovery on their expenditure. Housing associations often suffer any VAT they are charged on the land due to their VAT exempt rental activities, but they have an ability to issue certificates to ‘disapply’ that option, causing the sale to revert to being VAT exempt. This leads to a cost for the seller, or for the housing association in terms of negotiated price.

One current solution to this issue is for landowners to develop their land in order that housing is built just above foundation level and so sales are regarded as partly completed homes rather than bare land, which is known as “golden brick” planning. However, there is a general consensus that this structure creates significant barriers in the delivery of social housing, including increasing financing costs, land pricing, transfer delays, and that decisions are VAT-driven. The measure in the Budget to zero-rate the sale of land to housing associations is expected to remove or significantly reduce these barriers.

For those businesses involved in social housing or in potentially selling land to housing associations should review current and future land transactions now to identify where the new zero-rate may create VAT savings and simplify project delivery.

If the Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am. Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.