The Autumn Budget 2026 delivered a number of significant announcements for the construction and property sectors. While several measures are intended to support housing delivery and regeneration, others will increase the tax burden on certain property owners and investors.
Capital Allowances
Under a heading of maintaining stability for businesses and investment the Chancellor announced that there would be no changes to the full expensing regime. As a reminder, this was introduced in 2023 and provides corporation taxpayers with 100% capital allowances on most new main pool plant & machinery (including specialist services installations, FF&E etc) and a 50% first year allowance followed by 6% writing down allowances on special rate pool plant & machinery (including general building services installations, insulation added to existing commercial buildings etc).
Notwithstanding the claim of maintaining stability, the Chancellor did, however, decide to change the capital allowances regime for un-incorporated businesses with an increase in the current first year allowance for new main pool plant & machinery from 40% to 50%. This measure will be paid for by a general reduction in the annual writing down allowance from 14% to 12%, which will apply to all businesses and to existing pooled expenditure. Taken together this is expected to increase revenue for the government by approximately £1bn by 2030.
The new 50% first year allowance will apply from 1 January 2027 and the reduced 12% writing down allowance will apply from April 2027
There were no new announcements regarding extending the currently available 100% enhanced capital allowance on electric vehicle charging points, therefore this relief is expected to expire on 31 March 2027 as previously announced.
VAT – Zero Rate for Land sold to Social Housing Providers
Following recent consultations, the Chancellor announced the introduction of a new zero rate of VAT on land sold to registered social housing providers (housing associations) from 1 April 2027. The policy is intended to remove a longstanding VAT cost that can arise when housing associations acquire land for the development of new social housing. Under the current rules, some land transactions are subject to VAT which cannot be fully recovered by the purchaser, increasing development costs and reducing the funds available for housing delivery. By applying a zero rate, the Government aims to reduce these irrecoverable VAT costs, simplify transactions and accelerate the delivery of much-needed affordable and social housing.
The Government's consultation found that existing VAT rules often require complex "golden brick" arrangements, which can delay land transfers, increase legal and financing costs, and slow down development programmes.
Property Income Tax
The Autumn Budget 2026 confirmed the introduction of a separate regime for the taxation of rental income from April 2027. In an unwelcome move for landlords, the Chancellor subsequently announced that these rates will increase by 2 percentage points, resulting in tax rates of 24%, 44% and 49% for basic, higher and additional rate taxpayers respectively. While property income will continue to be calculated in broadly the same way, it will be taxed separately from employment and self-employment income under these dedicated property tax rates. Finance cost relief for unincorporated landlords will remain available at the property basic rate and, as a consequence, will increase to 24% from April 2027. The increase further widens the tax burden on individual property investors and may prompt some landlords to review the ownership structure of their property portfolios.
Business Rates
The Chancellor announced changes to the business rates regime which should have a positive impact on certain areas of the property sector.
To provide further help for the retail, hospitality and leisure sectors, the threshold for small business rate relief will be increased from £12,000 to £18,000, below which these businesses will not have to pay any business rates. A taper will then apply for rateable values up to £21,000. Current relief for pubs, social clubs and some live music venues will also be increased from 15% to 35%.
Although the enhanced capital allowance for electric vehicle charging points will be removed from April 2027, 100% relief for business rates on charging points will be introduced from that date. 100% business rate relief will also be available until April 2036 for electric vehicle only forecourts, to encourage the roll out of these facilities.
Landfill Tax
In line with announcements made in the Autumn Budget 2026 budget, the Government will increase the standard rate of Landfill Tax by RPI from 1 April 2027 and the lower rate will increase by the same amount in cash terms.
