Autumn Budget 2021: key policies for real estate

27 October 2021

The Autumn Budget reflects the change in the season: a more prudent outlook but more positive than perhaps expected with promises of a green future.

The Autumn Budget reflects the change in the season: more positive than perhaps expected with promises of a green future. Gone is March’s cautiously optimistic tone and the more reticent “hard choices” rhetoric trailed by Mr Sunak at the Conservative Party Conference, now replaced with a rather more confident stride into “a new age of optimism”. The Chancellor was, however, careful to remind us that the Budget “does not draw a line under Covid” but “does begin the work for preparing a new economy post-Covid.”

The post-Covid recovery is forecast to be quicker than initially thought.  The OBR predicts a return to pre-Covid levels at turn of the year (with growth revised up to 6.5%) and expected growth of 6% and 2.1% in subsequent years. The OBR’s forecast for business investment has also been revised up for the next five years and there are two million fewer people out of work than previously feared. This stronger economic position has afforded the Chancellor some fiscal room for manoeuvre.

The Chancellor has sought to put the public finances back on a “sustainable footing.” The approach is, perhaps, unsurprising in light of the figures, for example, the £97bn cost to taxpayers of the furlough scheme and national debt topping-out at almost 100% of GDP. With “borrowing higher than any time since the second world war” he set out a new charter for budget responsibility to “strengthen finances” and set out four fiscal judgments in the Budget:

  • to meet fiscal rules with a margin to protect against financial risks;
  • continue supporting working families;
  • improve the fiscal situation (including returning to spending 0.7% on overseas aid); and
  • increase department spending up to £150bn which the Chancellor heralded as the largest real-terms increase in overall departmental spending for any Parliament this century (being 3.8% growth spending in real terms).

Key policies

The focus of the following overview is primarily from the perspective of the real estate and construction sectors:

Business rates

Resisting calls from opposition parties to completely reform or even replace business rates, the Chancellor announced that he would “retain business rates but ease the burden”.

Businesses with eligible properties in the retail, hospitality, and leisure sectors were previously granted a pandemic business rates holiday alongside a frozen business rates multiplier in 2021-22. However, with the rates relief being phased out and expiring on 31 March 2022 some retailers are reportedly warning of closure if faced with a requirement to pay 100%. The "outdated" system has been blamed for business and store closures and there have been calls from both business groups and MPs for a relief to boost the high streets.

The Chancellor has recognised this and has announced a year-long business rates discount of 50% (up to a maximum of £110,000) for the retail and hospitality sectors (including pubs, music venues and gyms). The move has been welcomed by UK Hospitality: “we have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the Chancellor’s move today to extend the 50% business rates relief for the hospitality and leisure sector for the next financial year. The devil will be in the detail, though, so we look forward to learning to what extent it will benefit businesses.”

In response to pressures from both the Federation of Small Businesses and the British Property Federation, a rates exemption for green property improvements was announced to encourage adoption of green technology. This will assist businesses with plans to invest in plant and machinery including solar panels and heat pumps who will not be penalised by higher rates bills for increasing the value of their property in this way. This particular announcement is well-timed as the Government seeks to evidence the UK’s environmental credentials as we approach COP26 this weekend.

Additionally, and somewhat unexpectedly, a new business rates improvement relief was also announced as a result of proposals from the CBI and British Retail Consortium. The relief, which would apply from 2023 will apply to property improvements – such as installation of new CCTV or air conditioning in offices or addition of rooms in hotels – and would not result in additional business rates for the initial 12 month period following their installation.

The Chancellor’s package of business rates relief measures also included the cancellation of next years’ planned increase to the business rates multiplier – to help to protect businesses from anticipated effects of inflation. This will come as a relief to those who were concerned about a potential rise in the headline rate given that the UK’s uniform business rates exceed those of any other country in Europe (at 51.2p in every £1). The Treasury estimates that the new measures, when combined, amount to an overall cut of £7bn to business rates.

Notable for its absence, however, was an announcement on ‘meaningful’ longer term reform of business rates. As expected (since its announcement in the previous budget), the Chancellor announced that the conclusions from the review of business rates would be published today. However, he stopped short of announcing a wider business rates reduction – therefore preserving a sustainable funding source for local Government. This is likely to meet with outcry from wider-business – only two weeks ago (14 October 2021) UK trade associations issued a joint statement in which they reiterated the demand for business rates reform. Business rates will continue, at least for now, to lack the flexibility to respond quickly to economic changes and remain out of kilter with property values although the further announcement of three yearly revaluations from 2023 may assist with the current valuation driven unfairness. Kitty Ussher, chief economist at the Institute of Directors, said that while the business rates cut was “welcome”, other measures intended to boost companies’ confidence were “piecemeal”. Speaking about investor confidence, she further commented that “the Chancellor’s business rates and R&D tax credit reforms are welcome but with hefty hikes in other taxation on the horizon, that may not be enough to convince business leaders to press go on their plans for growth.”

Some will be disappointed that the Budget did not include an increase for empty business rates relief  (in the current market three months is insufficient for landlords to find tenants) or the extension of relief to other sectors (offices have not been offered a relief despite experiencing increased vacancy rates). Businesses face a potentially difficult March 2022 with the moratorium on evictions due to non-payment of rent for business tenancies (in England) also expiring. The potential knock-on effect of this being another concern for landlords who may end up footing the business rates bill for the resulting empty premises.

A failure to address wider business rates reform may attract criticism from the business community who might view this as undermining delivery of the "levelling-up" agenda. The Chancellor also faces scrutiny on this issue as a result of the shadow chancellor, Rachel Reeves’, promise of an “overhaul of business taxation” under Labour which would include scrapping business rates. However, the Chancellor dismissed these “reckless unfunded promises to abolish a tax which raises £25m” as “completely irresponsible” on the basis that “it would be wrong to find that money elsewhere.”

On a related point, the Government has said (in the Budget paper) that it will continue to explore the arguments for and against an online sales tax. However, there was no mention of the  tax by Mr Sunak in his speech. It has been suggested that an increase in the online sales tax could offset business rates discounts for small and medium-sized businesses. This is possibly more difficult for the Government to achieve now given that Pillar One of the Global OECD tax plan – to which the UK is a signatory - entails the standstill and withdrawal of unilateral measures, such as digital services taxes. Scott Parsons, the UK boss of shopping centre Westfield, said that he was disappointed Mr Sunak’s Budget announcements contained no update about the controversial online sales tax. “Of the £7.9bn that was raised through retail business rates between 2019 and 2020, just over 5% was raised from online retailers, who at the time represented approximately 25% of sales…the decision to continue to avoid imposing any kind of tax on the e-commerce sector is another blow, as bricks and mortar retailers continue to operate on an uneven playing field,” said Mr Parsons.


Earlier this year the Government announced that it would introduce a Residential Property Developer Tax (RPDT) so the housebuilding sector contributed towards the costs of addressing cladding issues. The Chancellor confirmed today that £5bn pledged to remove unsafe cladding will be partly funded by RPDT.

The draft bill and explanatory notes relating to the RPDT were published on 16 September 2021. It is intended that RPDT will be payable on profits of companies that undertake RPD activities that are realised in accounting periods from 1 April 2022. What had been missing, until today’s Budget, was confirmation of the threshold above which the tax would apply and the rate of that tax. The Chancellor has now announced that RPDT will be levied on profits over £25m at a rate of 4%. The £25m figure had been previously referenced in the explanatory notes accompanying the draft bill so was not unexpected and aligns with the Government’s intention that RPDT is levied on larger profitable developers.

Mary-Anne Bowring, group managing director at property management consultancy Ringley Group, said: “A blanket tax on developers is fairer than leaving leaseholders to shoulder the burden but it is still a blunt instrument to use to fix the cladding crisis.”

The Treasury launched a technical consultation on the draft legislation on 20 September (RPDT will form part of the draft Finance Bill 2022 due to be published next week) and there remain concerns around what types of development/developer will be caught by RPDT. Development such as student accommodation and BTR has been excluded from the remit of the tax which is welcome however it will be important to scrutinise the detail of revised legislation to see how wide the exclusions are. 

Public services/transport and infrastructure

A repeated theme of the Chancellor’s Budget announcement was the inherent importance of “public services.” Over £1.7bn has been allocated for the “infrastructure of everyday life” in over 100 areas. As part of this, the Chancellor announced an array of investments into the refurbishment and construction of public and community facilities to “level-up communities”. A number of these investments will be of potential interest to property professionals particularly in the construction and development sectors including: 

  • investment in health R&D (likely necessitating new spaces such as laboratories and science campuses);
  • grant funding for 40 new hospitals, hospital upgrades and hospital operating theatres;
  • £3.8bn investment into a prison building programme (the largest of its kind in a generation);
  • a network of family hubs around the country;
  • £560m for youth services including the construction of community football pitches and conversion of over 100 areas of derelict land into pocket parks; and
  • £800m to protect heritage such as museums and galleries including restoration of 10 regional museums and libraries.

Creative tax reliefs will be more generous and will be extended for two years to March 2024. To support theatres, galleries and other areas of culture and heritage tax relief will be doubled and won’t return to normal until April 2024. The Treasury estimates that this relief is worth £0.25bn.

The Chancellor also set out a £130bn package for investment in national transport and infrastructure to connect the country and drive productivity. The following investment will be made:

  • £21bn for construction of roads;
  • £46bn for rail improvement;
  • £5.7bn for London style transport settlements (in locations such as south Yorkshire, Liverpool and Manchester);
  • £2.6bn for a longer-term pipeline for local road upgrades; and
  • funding for buses, cycling and walking schemes in excess of £5bn.
SDLT rates/reliefs

As expected, the Budget did not include any announcements relating to SDLT.

The property market, having already dealt with the deadline for SDLT relief on the sale of residential property, did not anticipate a new relief to be introduced as the market is settling. The SDLT relief for sales of residential property provided a boost to the property market and the economy however it has "served its purpose" as we emerge from the initial impact of the pandemic. The Budget did not touch on any of the replacements for SDLT that have previously have suggested in industry commentary.

New homes and home ownership

The Chancellor has sought to harness further investment by reconfirming £11.5bn to build 180,000 new affordable homes with an additional £1.8bn to bring 1500 hectares of brownfield sites into use.

The Chancellor’s aim is to unlock one million new homes however, on the face of it, there does not appear to be anything concrete in the Budget announcement that cements the Government’s new focus on a return to higher rates of home ownership. The Budget did not include fiscal intervention to support home ownership, for example by additional support for first time buyers. The Chancellor did touch on the new residential property developer tax (RDPT) and Government will need to ensure that any such tax does not deter investment in and construction of social housing.

Although a "green" improvement relief was introduced in the commercial context through business rates measures no equivalent was announced in relation to domestic property. Given the backdrop of this weekend’s climate conference, and as a further step towards accelerating decarbonisation, it had been thought that reliefs (perhaps zero rating/reducing VAT on repairs and maintenance of residential buildings) might have been introduced to encourage property owners to improve the energy efficiency of their properties. In announcing its Heat and Buildings Strategy last week the Government appears to have chosen to address this aspect separately.


R&D investment into the UK’s “science superpower” status is high on the Government’s agenda so it is unsurprising that the Chancellor has confirmed the intention to maintain the targeted £22bn of R&D investment by 2026/27. The aim is for £20bn to be spent on R&D by end of this Parliament (in addition to the cost of R&D tax reliefs).

Total public investment will increase from 0.7% to 1.1% of GDP by the end of this Parliament which exceeds the OECD average of 0.7% internationally. Core science funding will be increased alongside other investment such as an increased budget for Innovate UK. The Chancellor also revealed the intention to “unlocking institutional investment” and capital alongside a £1.4bn investment fund.

Sectors such as life sciences will benefit from today’s announcements which is good news for investors in science parks and innovation campuses in the UK – there have been a number of recent high-profile investments into such assets reported in the property press and it seems that we should expect more of the same with the Chancellor’s desire to encourage “greater private sector innovation.” The Budget also included a commitment to improve R&D tax reliefs on the basis that UK business investment in R&D is less than half that of the OECD average. Reliefs will therefore be expanded in April 2023 to include cloud computing and data to incentivise investment in domestic R&D.

The Government’s net zero strategy was also singled out by the Chancellor as an “innovation strategy” with £30bn committed to the “green strategy.” The Chancellor took the opportunity to highlight the issuing of the second green bond and the recent announcement by the UK infrastructure bank of its first investment (a £107m financing of a new quay in Teesside for the construction, storage and shipping of equipment for the offshore wind industry).

Corporate taxation

At the March 2021 Budget corporation tax was increased to 25% (effective from 2023) however Mr Sunak was keen to reiterate today that this remains the lowest rate in the G7, to highlight the introduction of the super deduction and that “corporate taxation strikes a responsible balance”.

As expected, the Chancellor has announced that a 3% tax surcharge on bank profits will be retained to “maintain competitiveness” and the overall tax rate on profits in 2023 will increase from 27% to 28%. The balancing of surcharge against corporation tax is designed to secure the level of banking activity in the UK and to continue to ensure that the UK is attractive to global investment in a post-Brexit world.

Carbon tax and environmental

The COP26 climate change conference is a matter of days away and the Budget has provided a public stage for the Government to champion the UK’s green credentials. There have been a number of recent high-profile announcements alongside the publication of the new Treasury Document “Net Zero Review Analysis exploring the key issues” on 19 October 2021. However, the Budget did not introduce a carbon tax nor did it contain any explicit revenue raising measures that relate to the transition to Net Zero. Mr Sunak has previously warned that the Government will have to deal with financial deficit created from the loss of fuel duty as part of the intended transition to electric vehicles. The Chancellor did however freeze, and not increase, fuel-duty today.

The government, aware of the significant damage which surface water flooding can cause, is going to commission the National Infrastructure Commission (NIC) to report, by November 2022, on the effective management of surface water flooding in England. The review will assess current approaches to managing surface water and the range of options for intervening including “traditional built infrastructure and nature-based solutions”.


The Government has committed to an additional £65m to improve the planning system. Details are limited at the moment but it appears that the funding will be used to deliver a new digital system “which will ensure more certainty and better outcomes for the environment, growth and quality of design.”


In his keynote speech at the recent Conservative Party Conference, Mr Sunak said “I have never pretended there is some easy cost-free answer.” Today’s Budget speaks to that sentiment and responds to the steps taken by Government to prop up the economy during the pandemic and is set against the “challenging backdrop of rising inflation.” Inflation in September 2021 was 3.1% and, as confirmed by the Chancellor, is likely to rise further with the OBR expecting CPI to average 4% over the next year.

The Chancellor described how “global forces” are at work and with economies around the world reopening time is needed in order for production to be scaled back up. The Chancellor’s Budget comes with a warning: pressures, including demand for goods and energy outstripping or straining supply will take months to ease and it is “irresponsible for anyone to pretend we can solve this overnight.” The Chancellor acknowledges that the Treasury has taken some “corrective action” but reaffirmed his goal to reduce taxes by the end of this Parliament.

A fuller Budget than many had predicted, time will tell if Mr Sunak’s optimism in the British economic recovery post Covid-19 is prescient or misplaced.