Last week saw Rishi Sunak deliver his Autumn Budget and Spending Review. Read our article about the key announcements and implications here.
Focus on public spending
It was good news that the main focus for the property and construction sector in the Autumn Budget was on public spending rather than new tax measures, the key headlines being:
- £1.7bn dedicated to upgrading local infrastructure
- £1.8bn going towards the government’s £10bn commitment to investment in housing supply, creating over 1 million new homes
- £11.5bn Affordable Homes Programme investment between 2021 and 2026, creating a further 180,000 affordable homes. 60% of the funding for the Programme being attributable to homes outside London
- £5bn funding for remediation of the highest risk buildings with unsafe cladding
- £2bn will be used to unlock 1,500 hectares of brownfield land across England to clear derelict land and make way for 160,000 new homes, including £300 million for to unlock smaller brownfield sites, which will provide more opportunities for SME developers
- £9m to be invested between 2022 and 2023 to create over 100 green spaces across the UK on unused land, creating and broadening accessibility
- Continued investment in the Towns Fund, regenerating c.170 high streets, town centres and communities across England
Other key announcements
Residential Property Developer Tax (RPDT)
Whilst RPDT was no surprise, we did not previously have much by way of detail and Sunak used the budget to provide more information on the tax due for implementation in April 2022.
RPDT will be charged at 4% on profits exceeding an annual allowance of £25 million and it will part-fund the £5 billion Government commitment to remove unsafe cladding from the highest risk buildings.
For more information on RPDT including who will be affected and how it will be calculated and implemented read our article.
RPDT tax will have varying effects on different sectors and types of developer, but as the tax is aimed at residential developers with profits over £25m, arguably, this might allow smaller developers a better chance to compete in the market.
£1m annual investment allowance (AIA) extension until 31 March 2023
The Chancellor announced that the temporary increase in the limit of AIA of £1 million per annum, is to be extended to 31 March 2023. This aligns with the end dates of the super-deduction and special rate allowance. It was previously due to reduce to £200k from 1 January 2022.
This extension will particularly benefit those in the property fit-out sector, providing customers with tax relief on qualifying capital items quicker and ultimately making fit out work more reasonably priced.
Business rates relief for property improvements
Firms will be spared from paying higher business rates after making improvements to their properties under a new tax relief policy. It was announced that the business rates relief will start in 2023 and will last for 12 months, enabling businesses to make improvements to their premises as staff return to the workplace.
From 2023, new 100% investment relief will also be provided to encourage businesses to install green technologies like solar panels, with the two tax relief policies adding up to a combined £750m investment from the government.
This is potentially good news for the sector as it helps maintain confidence in the high street which should encourage continued investment throughout towns.
Good news for buy-to-let investors
It was announced in the Autumn Budget that the “reporting window” for landlords’ capital gains on the sale of property will be doubled from 30 days to 60 days from the completion of the transaction.
The current 30-day window can make things difficult for anybody selling a residential property that isn’t their main home so the extension of the filing date will be welcome and will give people the time they need to collect all information to enable them to calculate the capital gain/loss.
This change is applicable to both UK residents and overseas buyers and is welcome news for buy to let landlords.
Planning improvements – good news for builders
The Chancellor has ring fenced £65m in the Autumn Budget to take the planning regime digital and improve “certainty” for homeowners and developers. It has also allocated £65m in the next tax year to increasing caseworker capacity at the Land Registry, which has been plagued by delays this year.
Talk of a new digital planning system have been around for a while, but this is the first-time specific funding has been allocated. Government says it hopes a digital system would ensure “better outcomes for the environment, growth and quality of design”.
A digital planning system will hopefully mean there is better information available to developers and planning officers and make planning less of an obstacle.
Other notable points from the budget include:
- A huge prison building programme was confirmed with £3.8bn going towards 20,000 new prison places across England and Wales by the mid-2020s
- Up to £1.7bn of new funding was unveiled to enable a large-scale nuclear project
- Museums and galleries will get £800m to upgrade and renovate their buildings, while £760m will be given to sports and youth clubs to fund new buildings and sports pitches
- For infrastructure, £1.5bn of new money will be added to a host of existing announcements, including £5.7bn for eight city regions to transform their local transport networks. This includes £1bn for Greater Manchester and £710m for schemes in the Liverpool City Region
- The national living wage increased by 6.6% to £9.50 an hour. This will add a further cost burden on construction firms, particularly SMEs, already grappling with soaring prices for materials, labour and energy
Our thoughts
Construction was mentioned just four times in the 202-page budget and spending review document published by the Treasury. Instead, the focus of was on helping other sectors which have been battered by the covid pandemic to recover, including hospitality.
Given construction’s exemption from closure during lockdowns and the industry’s explosive growth earlier this year, it is hardly surprising that the focus was on other sectors.
Sunak said today’s budget was all about building a stronger economy, billing it as the start of a new “age of optimism” and there were some positives for the sector to take away.
There was no mention though of visa changes to assist with the challenge in labour shortages or help with spiralling energy costs, and the increase in the national living wage will add a further financial pressure for the sector it continues to battle pressures which have emerged during the pandemic recovery.
About Cowgills
Cowgills is a leading independent firm of Chartered Accountants and Business Advisors based in the North West of England – from Greater Manchester to Liverpool. We use our sector experience to deliver tailored financial solutions and support for businesses.
Please do get in touch with our team if you require advice or support following the Autumn Budget changes.
Disclaimer
The information was correct at time of publishing but may now be out of date.
