Autumn Budget 2026: What it means for real estate

Under the current provisions, land acquired for social housing by housing associations (HAs) is normally exempt from VAT. To avoid irrecoverable VAT creating a cost to such developments, sellers of the land and HAs have often entered into complex arrangements, sometimes referred to as golden brick arrangements.

The changes announced in the Autumn Budget will mean that from April 2027 simplified VAT rules will apply, removing the need for complex arrangements.

Summary

Currently, HAs can either suffer 20% VAT on the cost of acquiring land to build social housing or block the seller’s option to tax so the exemption applies. In either case, the HA will incur VAT on the acquisition, or the seller increases its sale price to account for the irrecoverable VAT incurred. This results in higher costs for social housing developments.

To overcome this, golden brick arrangements are commonly used. These involve the seller starting construction of the houses and then selling the ”property in construction”, which qualifies as zero rated. Provided this is done once the construction has reached the first course above ground level, and qualifies as zero rated, allowing VAT recovery of the related costs.

Our comment

All parties involved in social housing developments will welcome this change. The new VAT relief allows the HA to acquire the land without complex property and financing arrangements to remove the VAT cost.

HAs will be able to obtain earlier ownership of the land, which normally releases earlier access to funding. Complex arrangements will no longer be needed, and the change removes the need to transfer properties in tranches. This will also avoid the need for the landowner to enter into construction arrangements, and the sale of land will improve their cash flow.

The ability to zero-rate the supply of land is expected to speed up and increase the availability of sales to the HA sector and unlock the value of the land to support additional development sites.

The conditions for zero-rating are not yet clear, and HMRC is expected to issue guidance soon.

From 1 April 2027, business rates relief for pubs, social clubs and eligible live music venues will be enhanced. The small business rates relief thresholds are also increasing to support smaller businesses.

Summary

The Budget's business rates package is heavily focused on supporting retail, hospitality and leisure (RHL) businesses. The government's stated aim is that every RHL business in England will see its business rates either frozen, reduced or eliminated from April 2027.

From April 2027, relief for pubs, social clubs and live music venues will increase from 15% to 35%. The small business rates relief thresholds for eligible RHL properties will also rise significantly from April 2027, with the 100% relief threshold increasing from £12,000 to £18,000 rateable value and the taper threshold increasing from £15,000 to £21,000. Business rates bills for qualifying RHL properties will also be frozen in real terms for 2027/28 and 2028/29 rate years.

The government estimates that around 70,000 additional businesses will pay no business rates as a result, and that around half of all RHL properties in England will become exempt from business rates altogether.

In addition to these relief measures, the government announced a number of structural reforms. A new general anti-avoidance rule (GAAR) for business rates will be introduced to tackle avoidance schemes. Vape shops and adult gaming centres will lose access to certain reliefs, while the existing 1p transitional relief supplement will be extended for a further two years to help fund the wider package.

The Budget also advances business rates devolution, with mayoral authorities receiving a share of business rates payments from next year and plans for full local retention of rates income by the end of the decade.

Our comment

The measures announced are a welcome step for businesses facing continued cost pressures across the RHL sectors.

Increasing the small business rates relief thresholds and enhancing rates relief for pubs, social clubs and live music venues will help reduce costs, improve cash flow and support investment. The real-terms freeze on business rates bills also provides greater certainty for occupiers at a time when inflationary pressures and rising operating costs remain significant.

Whilst these measures provide meaningful short-term support for RHL businesses, a more ambitious and permanent reduction in the business rates multiplier would have been welcomed, ideally to a level closer to 35p. Such a measure would have provided greater certainty for occupiers and delivered a more substantial reduction in the property tax burden faced by RHL businesses.

Many would also have preferred the removal of the higher multiplier for all properties with a rateable value of £500,000 and above. Retaining this surcharge risks discouraging investment in larger commercial properties, many of which are significant employers and key contributors to local economies. Removing the higher multiplier would have helped create a fairer and more competitive business rates system, while supporting business growth and regeneration.

The government has announced an increase in the first-year allowance (FYA) for qualifying expenditure on new main rate plant and machinery from 40% to 50%, effective from 1 January 2027. A reduction in the main pool writing down allowance (WDA) from 14% to 12% was also announced, effective from April 2027.

Summary

The 2026 Autumn Budget saw several changes to the capital allowances regime for both corporation tax and income tax paying businesses.

The 40% FYA available to businesses subject to income tax on expenditure incurred on new qualifying plant and machinery, and to businesses incurring qualifying expenditure on assets used for leasing, will increase to 50% for expenditure incurred from 1 January 2027.

The main pool WDA rate will be reduced from 14% to 12%, with effect from 1 April 2027 for corporation tax paying entities and 6 April 2027 for income tax paying entities. The reduced rate will apply to existing main pool balances, as well as expenditure that does not qualify for upfront capital allowances relief. This is the second consecutive reduction in the main pool WDA rate, which was already reduced from 18% to 14% last year.

The current 100% full expensing FYA for companies investing in qualifying new main rate assets will continue to apply, as will the 50% first-year allowance for qualifying special rate expenditure

Our comment

We welcome the increase in the main rate FYA. The measure further narrows the gap between the relief available to income tax paying businesses and those undertaking qualifying leasing activities, and the full expensing regime available to companies.

However, this benefit is offset by the further 2% reduction in the main pool WDA rate. Asset-intensive businesses, such as real estate, infrastructure, healthcare and hotel and leisure, which have large main pool balances, will now obtain tax relief over a longer period.

The fact that these measures are expected to generate significant additional revenue for the government, as it is the biggest revenue raiser over the forecast period after HMRC measures to close the tax gap, suggests that the reduction in WDA rates is expected to outweigh the benefit of the increased FYA across the wider economy.

This emphasises that capital allowances planning remains increasingly important, with businesses needing to maximise access to upfront reliefs and carefully assess the timing and structure of capital investment decisions.

The government has published a consultation to finalise the details of a new founders’ relief. It will provide a 10% CGT rate on up to £10 million of lifetime gains from 6 April 2027.

The relief is intended to reward founders of innovative UK businesses, but the qualifying conditions as drafted are significantly more restrictive than those applying to business asset disposal relief (BADR) and may limit its practical availability.

Summary

The relief is intended to encourage entrepreneurs to establish, grow and retain innovative businesses in the UK by providing a reduced 10% CGT rate on qualifying share disposals. It will be available for disposals made on or after 6 April 2027 and will be subject to a £10 million lifetime limit per individual. The limit will be reduced by amounts claimed under BADR and investors' relief from that date.

To qualify, an individual must have:

• Held at least 25% of the company's ordinary share capital when the trade commenced

• Owned shares or securities in the company for at least five years before disposal, and

• Been UK tax resident for at least five continuous tax years prior to the disposal

Importantly, the relief will apply to all shares disposed of by a qualifying individual and is not restricted to shares acquired when the company was founded.

The company must:

• Be within the scope of UK corporation tax and maintain a substantial UK presence

• Carry on a qualifying trading activity, and

• Have achieved a minimum level of scale, including turnover of at least £10 million and at least 15 qualifying full-time employees before disposal

The company must also meet at least two of three additional tests designed to demonstrate sustained growth and innovation. These focus on turnover growth, employee growth and qualifying R&D expenditure.

Claims will be made through the self-assessment tax return for the year of disposal, and supporting information will be needed to demonstrate the qualifying conditions have been met.

The consultation closes on 30 November 2026 to allow sufficient time for legislation to be finalised before the relief takes effect from 6 April 2027.

Our comment

The government's objective is clear. While the UK has a strong record of creating innovative start-ups, it has historically struggled to scale those businesses into large, internationally competitive companies. By linking this tax relief to growth, employment and innovation, the government seeks to incentivise entrepreneurs whose businesses deliver broader economic benefits to the UK.

It is disappointing, therefore, that the consultation proposes what would become one of the most heavily conditioned tax reliefs in the UK tax system. Qualification depends not only on the founder’s shareholding and residency position, but also on a range of company-level metrics that may span a ten-year period. In practice, founders are likely to require detailed professional advice both before and after a transaction to determine whether the conditions are satisfied.

Some aspects of the design appear particularly restrictive. The requirement that the company continues the same trade for which it was originally established may prevent relief being available where a business has successfully evolved or pivoted in response to market opportunities. While the provision is clearly aimed at preventing abuse, it may not reflect the commercial reality that many highly successful businesses develop significantly from their original business model.

The proposed innovation test may also create uncertainty. Eligibility can depend on whether historic R&D expenditure qualified for relief, an area that has become increasingly subject to HMRC scrutiny. The consultation acknowledges that a subsequent challenge to an R&D claim could lead to founders’ relief being withdrawn, potentially leaving individuals with additional tax liabilities and interest.

There are also practical concerns around compliance. Founders may need access to information that is held by the company, sometimes many years after the relevant period. The consultation therefore proposes granting individuals a statutory right to request information from companies. While this may assist claimants, it will create additional administrative obligations for growing businesses.

In its current form, the breadth and complexity of the proposed conditions impose an added burden on businesses, and the resulting uncertainty may limit the behavioural impact that the relief is intended to achieve.

Founders’ relief achieving its policy objectives will rely on striking the right balance between targeting support and maintaining simplicity. It has the potential to become a valuable addition to the UK's entrepreneurial tax landscape, but not as drafted.

There were no changes to stamp duty land tax (SDLT) rates announced in the Autumn Budget, with only minor technical changes introduced.

Summary

No changes to the rates or thresholds for SDLT were announced in the Autumn Budget, which included the following technical changes:

• Rules to remove rent payable on assured shorthold tenancies from the scope of SDLT to be included in the Finance Bill 2026/27, effective retrospectively from 1 May 2026. This change was previously announced when the Renters Rights Act was introduced earlier in the year

• The rules for SDLT group relief, which provides 100% relief for transfers of land in England or Northern Ireland between members of a corporate group, will be changed from 29 October 2026. The relief will be withdrawn if the vendor is wound up and the purchaser subsequently leaves the group within three years from the date of the original transfer

• An exemption from SDLT for transfers from local government pension schemes to qualifying pooled investment vehicles will be introduced for transfers taking place between 28 October 2026 and 31 March 2032

Our comment

None of the SDLT changes announced should affect individuals buying their own homes. HMRC has already adopted the changes to assured shorthold tenancy rents in practice, given their intended retrospective nature, so they should not result in any changes for tenants entering new leases.

The changes to SDLT group relief will have implications for businesses restructuring, particularly in the real estate sector. Previously, groups could close off the risk of a clawback of group relief initially claimed on an inter-company transfer by liquidating the vendor if it had no ongoing activities. Under the proposed rules, this relief could be withdrawn if the purchaser company leaves the group after the vendor is liquidated and within three years of the original transfer. This will put the purchaser in the same position whether the vendor remains in the group, is liquidated or leaves the group through a sale of its shares.

It remains to be seen whether equivalent changes to group relief for Scottish land and buildings transactions tax or Welsh land transactions tax will also be made.

Income tax rates applying to savings and property income will increase from April 2027, while most income tax thresholds and national insurance limits remain frozen.

The government has confirmed that income tax rates on savings and property income will increase by four percentage points from 6 April 2027, double the increase originally announced at Budget 2025.

The measure leaves tax rates on other sources of income unchanged, while most income tax thresholds and national insurance limits will remain frozen until 2030/31, as previously announced.

Summary

The government previously announced that separate rates of income tax will apply to savings income and property income from 6 April 2027, while income from employment, self-employment and pensions would continue to be taxed at existing rates.

That measure has been amended, so that income tax rates for savings income and property income will now increase to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers.

The new savings income tax rates will apply across the UK. The new property income tax rates will apply in England, Wales and Northern Ireland.

Other income tax rates and allowances

Income tax rates applying to employment income, pensions and trading profits (20%, 40% or 45%) and dividend income (10.75%, 35.75% or 39.35%) remain unchanged.

The existing dividend allowance and personal savings allowance will also remain in place. These currently shelter the first £500 of dividend income and up to £1,000 of savings income for basic rate taxpayers (£500 for higher rate taxpayers).

National insurance contributions

Most national insurance contributions limits, thresholds and rates have been frozen, except for the Class 1 lower earnings limit (increased to £6,916) and Class 2 small profits threshold (increased to £7,355). There is also an increase to the weekly rates of Class 2 (£3.80) and Class 3 (£19.05) national insurance contributions.

Our comment

The increase to the tax rate on savings and property income was first announced at the 2025 Autumn Budget. The Chancellor has now opted for a larger increase, doubling the previously proposed rise from 2% to 4%.

These measures seek to increase tax revenues while maintaining the government’s commitment not to increase the headline income tax rates for “working people”. Instead, the measures fall on savers and landlords.

We assume the changes will see the deduction available to landlords of residential properties increase from 20% to 24%, and that trustees will also be subject to the increased rates on their savings or property income. We expect to see an accompanying change to the allocation of allowances and reliefs such that these deductions must first be taken against income subject to 20%, 40% and 45% tax rates before property or savings income.

Savers should ensure they are taking full advantage of available tax-advantaged investments, particularly ISAs, within which interest and dividend returns are not subject to tax.