The Chancellor’s much anticipated Autumn 2025 Budget has many takeaways for the built environment sector.
It saw Rachel Reeves announce a raft of new taxes to plug public finances rather than break a manifesto commitment to not increase Income Tax or National Insurance.
The headline grabbing new Mansion Tax, or less snappy High Value Council Tax Surcharge, will certainly have implications for the higher end of the housing market in London and the South East. However, it will impact fewer than 1% of total UK properties. This tax will be introduced from April 2028, starting at £2,500 a year for properties over £2m, rising to £7,500 for those above £5m, based on updated valuations. Income tax rates from property income will also be increased by 2% from April 2027.
A welcome result for housebuilders is that the current two landfill tax rates will remain unchanged, as consulted on earlier this year. The Chancellor has said the tax exemption for backfilling quarries will be retained to allow housebuilders and the construction sector a low-cost alternative to landfill. A new Land Remediation Grant from Defra will also help to incentivise brownfield development. The industry may argue however that these savings are neutralised by the rise in minimum wage payments.
Also announced was an additional £48m of funding for the planning system, largely for the recruitment of planners, but also likely for technology improvements given the funding is shared between multiple departments. Rather than a groundbreaking new announcement, this is more of a nice addition to the wider planning reforms in the Planning and Infrastructure Bill that are about to be given royal assent. The Budget emphasised the importance of this flagship bill and highlighted the secondary legislation and consultations to follow on areas such as proportionate pre-application engagement for Nationally Significant Infrastructure Projects, roll out of Environmental Delivery Plans, and the Judicial Reforms Review package.
For local government enthusiasts, the news that Mayors would be allowed to introduce a visitor levy on overnight visitor accommodation is a significant step in further boosting devolution settlements. £13bn of Spending Review funding will be devolved to the seven mayoral strategic authorities, whilst £1.3bn of the new National Housing Delivery Fund will be part of the integrated settlements for Greater Manchester, Greater London, Liverpool City Region, the North East, South Yorkshire, West Midlands and West Yorkshire. The devolved nations will now receive an additional £1.7bn of funding compared to that allocated by the Barnett formula in the Spending Review.
There was a limited focus on social housing. From Autumn 2026, an adjustment for housing benefit and Universal Credit claimants in supported housing or temporary accommodation will reduce the financial cliff edge so that working more hours will not reduce income. But those anticipating an announcement on Social Rent Convergence will have to wait until January 2026 when the Social and Affordable Homes Programme is launched.
The OBR’s accompanying Economic and Fiscal outlook report – which was leaked just before the Budget – gives some interesting figures on housebuilding. The report expects net additions to the UK housing stock to fall from an average of 260,000 a year in the early 2020s to a low of 215,000 in 2026-27 - far below the Government’s target of 300,000 a year. The fruits of new planning reforms are expected to be seen by 2029-30 where net additions will rise sharply to 305,000. This exceeds the average target but too late for that all important 1.5 million home number to be reached. It begs the question, when will the Government admit that they are not on track to reach this target, and what further steps will they take to rectify this?