Tax Impact on the Real Estate Sector – Autumn Budget 2024

The Autumn Budget 2024 introduced various measures which have a direct impact on the UK’s real estate sector. The changes announced are in addition to the confirmation that the Furnished Holiday Let rules previously announced will remain. 

Now that more details have been released, we summarise below the key changes applicable to those in the Real Estate Sector. 

Capital Gains Tax (CGT) 

The main rates of CGT on the sale of commercial property have increased from 10% / 20% up to 18% / 24% effective from 30 October 2024. This change aligns the rate of CGT charged with residential property disposals.  

The Government has also announced a change to Business Asset Disposal Relief (BADR), a relief available to those selling a trading business. Currently, individuals who sell a trading business can qualify for a reduced CGT rate of 10% for gains falling within a £1m lifetime allowance. Whilst the £1m allowance has remained the same, any gains realised from 6 April 2025 will be subject to CGT rate of 14%, and an 18% rate from 6 April 2026. 

Further details of the CGT changes can be found here.  

Stamp Duty Land Tax (SDLT) 

Unexpectedly, the Chancellor announced an increase to the SDLT rate applicable to those buying second homes to 5% up from 3%. This new rate applies to all purchases with an effective completion date on or of 31 October 2024, although some transitional rules will apply.  Companies buying residential property with a value in excess of £500,000 will face an SDLT charge of 17%, up from 15%, from the same effective date. Again, some reliefs for qualifying use are available. 

Further details of the SDLT changes can be found here.  

Carried Interest 

Carried interest has been historically used to incentivise private equity funds and this normally requires fund managers to co-invest with their other investors. A number of real estate projects are financed through such structures. 

Carried interest is currently being taxed at the CGT rate of 28%. The Chancellor is taking a two-staged approach to reform how carried interest is taxed:  

• With effect from 6 April 2025, the CGT on carried interest will be increased to 32%; and 

• From April 2026, carried interest will be subject to Income Tax (and not CGT) with a 72.5% multiplier applied to ‘qualifying’ carried interest. 

Further details of these changes can be found here.

Employer’s NI and National Minimum Wage 

From 6 April 2025, the rate of Employer’s National Insurance Contributions will increase from the current 13.8% to 15%. In addition, the point at which employers begin to employer’s NIC on an employee’s salary, is reducing to £5,000 per annum from the current £9,100.  

The top rate of the National Minimum Wage will also increase by 6.7% to £12.21 per hour (up from the current rate of £11.44 per hour). 

Further details of these changes can be found here.  

Capital Allowances 

Included in the Corporate Tax Roadmap, which hopes to give companies greater certainty about the Government’s taxation plans whilst in Parliament, was confirmation of its commitment to maintain full expensing during this period whilst maintain the Annual Investment Allowance, Writing Down Allowances and the Structures and Building Allowance.  

Business Rates 

The Chancellor is looking to reform business rates with an intention to lower multiples for the retail, hospitality and leisure sector from April 2026. In the meantime, the Chancellor has announced a 40% relief on business rates for retail, hospitality and leisure sector in 2025-26 up to a cap of £110,000 per business. 

Agricultural Property Relief (APR) and Business Property Relief (BPR) 

Possibly one of the biggest changes is the announcement is those made around Inheritance Tax.  A number of landed estates and farmers rely on APR / BPR, and various property developers (and housebuilders) rely on BPR for IHT purposes. The Government will reform these reliefs which will enable it to increase its IHT collection. 

With effect from 6 April 2026, 100% relief will only be available up to a combined cap of £1m. Any value of the qualifying agricultural or business property in excess of £1m allowance will receive 50% relief which will result in an effective IHT charge at 20%. 

The new rules will also apply to lifetime transfers made on or after 30 October 2024 if the donor passes away on or after 6 April 2026. 

These changes will have a profound impact on individuals and/or businesses operating in the UK real estate sector. A good understanding of these changes is required to enable you to plan your affairs in a tax-efficient manner.  

If you have any further queries that weren’t covered in this article, please contact our team for further assistance.