Budget 2024: Impact for construction and property firms

Here, David Sharp shares his summary and reaction to key points in the Budget for construction and property businesses.

Employer costs increasing

• The Government announced that it will increase the employer rate from 13.8% to 15% from 6 April 2025. The Government will also reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028, and then increase it by Consumer Price Index (CPI) thereafter.
• The Government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2025.
• The Employment Allowance currently allows businesses with Employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025 the Government will increase the Employment Allowance from £5,000 to £10,500, and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills.
• Contract workers employed via umbrella companies will also be hit by the Employers NIC rise, and where their assignment rate is not increased, will see their take-home pay reduced.

Investment in infrastructure and affordable housing

The Government has been clear that it wants to deliver 1.5 million homes by the end of the Parliament, as it announced:

• £3bn of additional support for Small and Medium Sized (SME) housebuilders and the Build-to-Rent sector (BTR) for purpose-built rented housing, in the form of housing guarantee schemes, allowing developers to access lower-cost finance.
• A £500m ‘top-up’ to the Affordable Homes Programme to build up to 5,000 additional affordable homes.
• Additional funding for the development of schools, hospitals and infrastructure projects, particularly in transport and renewable energy, which could create substantial opportunities for the construction sector.
• Reducing discounts on the Right to Buy scheme and enabling councils in England to keep all the receipts generated by sales which will allow them to invest in additional properties to replace the homes that are bought by tenants.
• A pledge to increase funding for the Boiler Upgrade Scheme in England and Wales this year and next, following the high demand for the scheme. The Government is also providing funding to grow the heat pump manufacturing supply chains in the UK to support the plan.

Planning approval process

• There were changes aimed at speeding up the planning process for housing and infrastructure projects. Specifically, a streamlined approval process to support the Government’s target of building 1.5 million homes across the UK within the Parliamentary term.
• Measures introduced will aim to empower local councils and reduce red tape, enabling them to make quicker decisions on planning applications, particularly in areas designated for urban regeneration and sustainable development.
• An additional 300 planners will be trained or recruited into local planning departments through £46m of additional funding to accelerate large sites that are stuck in the system and boost local planning authority capacity.

Stamp duty increases

• For individuals, companies and non-natural persons who purchase additional residential properties, such as second homes or buy-to-let properties, in England and Northern Ireland, the Stamp Duty Land Tax (SDLT) has increased from 3% to 5% for transactions on or after 31 October 2024.
• In addition, there is also an increase in the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%, from the same date.
• There was no extension to the current stamp duty holiday. The temporary higher rate of £250,000 was introduced in September 2022 and will now go back down to its previous level of £125,000 from 1 April 2025. This will mean that for the purchase of additional properties, stamp duty will be 5% up to £125,000 and 7% from £125,001 to £250,000.

Other matters

• Corporation tax and tax reliefs: The Budget reaffirmed previously made commitments to maintain the headline rate of corporation tax at its current level and continue key incentives such as full expensing and the annual investment allowance. These provide tax reliefs on investments in qualifying assets and costs linked to construction, modifications, fitting-out or refurbishments.
• Fuel Duty frozen: Fuel duty has been frozen since 2011 and was further cut by 5p by the Conservative Government, a measure that was set to expire in March next year. However, The Chancellor has confirmed that the 5p cut will be retained and fuel duty frozen for another two years. This is positive news for construction firms with material costs and supplies closely linked to the logistics industry.
• Business rates: Businesses in the hospitality, retail and leisure sectors will receive 40% business rates relief in 2025-26 rather than the 75% relief they receive in the current year. From 2026, these businesses will have their rates calculated using “permanently lower multipliers” to be confirmed.
• CGT: The Capital Gains Tax lower rate increased from 10 to 18% and the higher rate from 20% to 24%. However, gains on residential property were maintained at 18% and 24%, which had been a concern for the construction and property sector.