As anticipated, this budget saw tax increases which affect the property industry, as well as the reinforced commitment to invest in housing and infrastructure.
CGT, SDLT and IHT changes
Whilst increases in Capital Gains Tax (CGT) tax rates were widely heralded, they were not as hefty as many had feared (with the lower rate from 10% to 18% and the higher rate from 20% to 24%). However, the increase in Stamp Duty Land Tax (SDLT) from 3%-5% on the purchases of second homes, companies purchasing residential property and buy-to-let residential properties could impact small private landlords and those larger businesses investing in the private rented sector. As a result, there may be fewer private rented properties available in the market, leading to even more upward pressure on rents in the sector.
The changes to Inheritance Tax (IHT) are going to have a significant detrimental impact on the farming sector, with Inheritance Tax Relief for the combined value of agricultural and business assets to be capped at £1m (plus the Nil Rate Band) with effect from April 2026. The value of any agricultural or business assets in excess of £1m will benefit from 50% relief (subject to meeting qualifying criteria) and the resulting taxable value will be subject to a tax rate of 40%. Prior to the budget, the value of agricultural and business assets was uncapped and benefitted from 100% relief. The announced changes create barriers to generational planning and business investment. The significant IHT liabilities will need to be funded from land/property sales or bank funding which will put additional financial pressure on businesses.
Infrastructure investment and planning
The increased focus on long term investment in the country’s infrastructure and support for the delivery of tens of thousands of new homes will be welcomed by the property industry, alongside the government’s plans for a national industrial strategy. On a local level, the government has committed to deliver on a strategy for the growth of Cambridge via the newly formed Cambridge Growth Company to the tune of £10m. Although we welcome the investment, how this new quango will work within the myriad tiers of existing local government in the region (parish/ ward, combined district/city, and county councils, and the Cambridge and Peterborough Combine mayoral Authority) will be interesting to see.
The additional funding to support recruitment and training to bolster planning teams also confirmed in the Budget is positive, however, we suspect many in the property development industry will question how far 300 new recruits will go to ease the pressure on local planning authorities, and whether the promised “simplification and streamlining “ of the planning system, which has been promised by every new government for the past 30 years, will actually lead to the system getting even more complicated, as in previous attempts by successive regimes.
The government has also committed to the delivery of the East West Rail between Oxford, Milton Keynes and Cambridge. This includes funding to accelerate delivery of the Marston Vale Line ensuring services will run between Oxford and Bedford from 2030. This scheme hopes to unlock land for housing and laboratories across the region, particularly around Cambridge, to support its world-leading life sciences sector. The government is also launching the consultation for the next stage of East West Rail, which will link Bedford to Cambridge itself – there is still the significant challenge of addressing the impact on many neighbourhoods and countryside areas to the west of the city.
Business Rates
When it comes to business, the government’s stated aim was to deliver a fairer business rates system through permanently lower business rates multipliers for retail, hospitality and leisure (RHL) properties from 2026-27. More of the burden of business rates will fall on larger occupiers with rateable values of £500,000 or more (such as large warehouse operators), who will be charged a higher rates multiplier. Whether the reliefs for small businesses and the retail and leisure sector will compensate for the increases in employment costs caused by the rises in the national living wage and employers’ National Insurance contributions contained in the Budget, remains to be seen.