UK Budget 2025: ‘positive glimmers’ in property tax announcements

Property tax expert Andrew McCarthy of Pinsent Masons was speaking following Wednesday’s Budget, which included several property tax related announcements. A headline announcement was the increase to income tax on property income. From April 2027, separate rates for income tax on property income are being introduced. The property basic tax rate will be 22%, up from 20%; the property higher tax rate will be 42%, up from 40%; and the property additional tax rate will be 47%, up from 45%.

This increase “may well end up being inflationary in nature, if landlords pass the cost on to tenants”, said McCarthy. “It is also likely to continue the trend of individual landlords selling up and increasing market share for larger, more professional build-to-rent players,” he said.

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The government also announced its intention to consult shortly on reforms to VAT rules to incentivise the development of land intended for social housing, which was welcomed by McCarthy.

“Extending zero-rating treatment to sales of land to social housing providers before construction work has commenced – rather than after commencement, at the so-called ‘golden brick’ stage – is likely to ease funding pressures and simplify transactions, and we look forward to engaging with the consultation,” he said.

As part of its continued efforts to close the tax gap and tackle fraud, the government announced its intention to strengthen HM Revenue & Customs’ powers to tackle fraud within the construction sector through the Construction Industry Scheme rules. The government is also announcing regulations aimed at simplifying and improving the administration of the scheme, which will be published for technical consultation.  

“Any opportunity to simplify the Construction Industry Scheme is a step in the right direction,” said McCarthy. “It remains a scheme that is poorly understood and needlessly expands the scope of ‘construction’ far wider than is necessary for revenue protection.”

Another anti-avoidance announcement relates to the non-resident capital gains tax rules. The government intends to amend these rules, closing loopholes for protected cell companies and clarifying legislation for investors. Changes apply with immediate effect, with further administrative reforms from 6 April 2026.

The Budget also included several announcements in relation to business rates. From 1 April 2026, business rates bills in England will be updated to reflect changes in property values since the last revaluation in 2023. As a result of the revaluation, the small business multiplier will decrease from 49.9p to 43.2p and the standard multiplier will decrease from 55.5p to 48p. The government also announced its intention to introduce new permanently lower retail, hospitality and leisure multipliers, for properties with rateable values below £500,000. These rates will be 5p lower than the national multipliers, making the small business RHL multiplier 38.2p and the standard RHL multiplier 43p. However, this will be funded in part by a higher multiple for properties with a rateable value above £500k which will face a multiplier increase of 2.8p to 50.8p.

To support ratepayers facing large bill increases at the revaluation the government is introducing a redesigned transitional relief scheme. However, the government is also introducing a 1p supplement to the relevant tax rate for ratepayers who do not receive transitional relief or benefit from small business support, which will apply for one year from 1 April 2026.