The Chancellor of the Exchequer Rachel Reeves has introduced major legislative changes in Wednesday's Budget that will have provided few surprises for the real estate industry, but much in the way of relief.
The announcement, delivered in the House of Commons at half past noon local time, had extraordinarily been pre-empted two hours beforehand when much of the detail had been accidentally published by the Office for Budget Responsibility.
Real estate practitioners inside and outside the country had already digested most of the big announcements affecting the industry, on business rates, the United Kingdom's property tax levied on businesses, and the introduction of a mansion tax, trailed before the address.
Those plans saw the Chancellor introducing a higher value multiplier for property valued at over £500,000 and introducing a new levy for residential property valued at £2 million and above.
Most in real estate were concerned about bond market volatility and there has been huge relief that within a few hours after noon financial markets had reacted calmly, both to the early document publication and the actual address. United Kingdom real estate investment trusts such as Landsec, Hammerson and British Land had share prices all trading between 2% and 3% higher by the same point.
Reeves once again attempted to walk the tightrope of persuading financial markets that she is cutting the United Kingdom's £2.6 trillion national debt, with one in every 10 pounds the government pays being used to pay down interest, while raising £26 billion in taxes in a manner that does not stall economic growth and turn away voters.
Introducing the Budget, which lays out the government's fiscal priorities and measures for ensuring economic stability for the next financial year, Reeves said: "We are rebuilding our economy. We have overhauled our planning system to get Britain building, and raised public investment to its highest level in four decades."
Perhaps the biggest economic shock for the United Kingdom taxpayer was confirmation that a freeze on income tax thresholds will remain in place for three years instead of an expected two years. That will mean that by 2031 the thresholds for income tax will have been frozen for nearly a decade. It was first announced in 2021 during the pandemic.
Reeves said the OBR has upgraded Britain's real gross domestic product growth from 1% to 1.5%. In some unexpected good news for the financial markets, Reeves also confirmed she was to "more than double" the fiscal headroom against her stability rule to £21.7 billion from £9.9 billion.
Melanie Leech, chief executive of the industry lobby group British Property Federation, said there was not a single thing in the Budget that had not been leaked in the "chaotic" buildup. But she said the lack of surprises didn't hide the disappointment that many in the development industry would be feeling.
"There was little to cheer from an investor perspective. Indeed, confirmation of the large property business rates surcharge will impact critical national infrastructure like logistics businesses and priority sectors identified in the Government’s own Industrial Strategy. While it was always going to be a challenge for the Chancellor to both balance the books and support economic growth, it is disappointing that there was nothing introduced to alleviate acute development viability issues. Overall, no surprises, but nothing to cheer either.”
Tasos Vezyridis, head of research, United Kingdom and Ireland and continental Europe for global real estate services firm CBRE, said the Budget paints a complex picture for United Kingdom real estate.
"While its contractionary stance may temper growth, it increases the likelihood of a December interest rate cut, which would ease debt costs for the sector and subsequently stimulate more investment activity." But he said the bigger question is how the Budget impacts long-term bond yields. "If fiscal measures are perceived to fall short, rising bond yields could place further downward pressure on already fragile real estate valuations"
Vezyridis said increased income tax on earnings from property may tighten rental supply if private landlords exit the residential market.
"For commercial property, business rate reform remains pivotal, influencing occupier affordability and ultimately investor returns. Meanwhile, there were welcome commitments to regional infrastructure projects as well as recognition of the need to increase capacity within the planning system, so that more projects can be delivered."
He said the mansion tax would fall disproportionately on London and the South East, hitting homeowners hard.
Real estate services firm Colliers’ head of research and economics Walter Boettcher said the Budget has been greeted with a "modicum of indifference" but added that the final verdict may still be out. "The gilt markets were largely unmoved. Lack of any significant retrenchment in public spending does not appear to have undermined the Budget as might have been expected. Nevertheless, while the Chancellor’s focus on numerous areas offering limited scope for tax-raising may achieve ideological ends, fairness, it does little to offer a reliable foundation for regulatory stability. This leaves some expecting another possible return to tax issues in future budgets."
Boettcher said that Colliers anticipates that the Bank rate will fall more quickly than markets currently suggest and gilt rates may fall more slowly, offering challenges for commercial property.
"For investors with longer horizons, any disruptive policies are more than likely to normalise in the next pre-election period, making 2026 a potential buy opportunity for some. United Kingdom REITs were up by almost 2% immediately after the Budget speech. The long-term prospects still looks favourable, especially in comparison to many of our G7 peers, including countries with similar domestic stresses.”
James Roberts, United Kingdom economist and director, market intelligence, for real estate services firm Avison Young, said: “Perhaps the best thing about the Autumn Budget is that it is now out of the way. Recent business and consumer surveys have shown trepidation over what measures the Budget may contain, prompting a ‘wait-and-see’ attitude that has slowed the economy. The constant back and forth over which taxes will rise has done no one any good. However, at least now everyone knows where they stand, and we have the possibility of a Bank of England base rate cut of 25 basis points in the comings weeks to shift the mood in the economy towards positivity."
Nik Potter, associate, commercial research at real estate firm Knight Frank, said that from a capital markets lens, early market signals are steady rather than spectacular, but enough to calm nerves.
"Gilts may stay elevated in the near term yet confidence is building that we could see easing from late 2026 into 2027. For commercial real estate investors, this hints at a shift from pure caution to more calculated positioning as investors will now start planning rather than pausing. Fiscal discipline is now as much about preserving confidence as it is about balancing the books. The market demanded that the Government play the long game, and not swing for the boundary on every ball."
Potter said the Budget’s focus on infrastructure, innovation and productivity sends an important message that the United Kingdom is "competing for global capital not just waiting" for it.
Potter added: "Strategic investment unlocks confidence and keeps the door open for private sector opportunities, particularly into real estate sectors with resilient income profiles and growth opportunities."
Robert Taylor, head of research at DTRE, say the measures overall were "quite disinflationary" which will "hopefully push down on interest rates and gilt yields".
"But ultimately it feels a bit like a kicking the can down the road. We could easily be back facing rises this time next year."
Business rates
The government's proposals for business rates have the most direct impact on the commercial real estate market.
Reeves confirmed to the Commons that the government will introduce "permanently lower tax rates" for more than 750,000 retail, hospitality and leisure properties.
The move will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retail giants, she added.
Treasury documents confirm permanently lower RHL business rates multipliers. The rates sit at 5p below their national equivalents, making the small business RHL multiplier 38.2p and the standard RHL multiplier 43p in 2026-27. The bands remain at below £51,000 rateable value and £51,000-£499,999. Small and standard RHL properties will pay the lowest tax rate since 1990-91 and 2010-11 respectively, according to the government.
The higher rate on the most valuable properties, with rateable values of £500,000 and above, representing around 1% of properties, is being set at 2.8p above the national standard multiplier in "recognition of the important role these properties play in the government’s growth mission". The high-value multiplier will be 50.8p in 2026-27.
The government said that following the rates revaluation, all ratepayers will pay a lower tax rate than they do now, with the small business multiplier falling to 43.2p and the standard multiplier 48p. At this revaluation, over half of ratepayers will see no bill increases, including 23% seeing their bills go down.
The government is also providing a support package worth £4.3 billion over the next 3 years. This breaks down to: a £3.2 billion Transitional Relief scheme providing more support to the largest ratepayers, including airports and hospitality; a Supporting Small Business scheme to help the smallest businesses worth over £500 million; expanding the Supporting Small Business scheme to businesses who were eligible for RHL relief, protecting independent pubs and shops as they transition to permanently lower tax rates. This additional support is worth £1.3 billion, it said.
The government said it is also taking the next steps to reform business rates, building on the interim report published in September. It is also providing an additional two years of Small Business Rates Relief for businesses expanding into a second property, and publishing a call for evidence exploring how to tackle barriers to investment. It also explores concerns ratepayers have raised around the "receipts & Expenditure" valuation methodology and its impacts on long-term, high value investments.
Alex Probyn, practice leader, Europe and Asia-Pacific property tax, global tax firm Ryan, said that although the Government had the legislative flexibility to set the high value multiplier up to 10p above the national rate, the 2.8p supplement being introduced will still have a material impact on 21,100 ratepayers "who do not necessarily have the broadest shoulders".
"This measure is not targeted at the 1,900 online retail or large fulfilment centres alone as it applies to every property above £500,000 rateable value, from major offices to regional headquarters and critical infrastructure sites. The effect is far wider than the public debate around ‘taxing online retail’ suggests."
Probyn added: “It is important to recognise that small RHL properties currently receive a 40% Exchequer funded discount on their bills, capped at £110,000. Moving to a permanently lower RHL multiplier, a 5p reduction, delivers equivalent support to just 11.6% despite legislation allowing for a reduction of up to 20p. This represents a very significant fall in relief for many small high street businesses, even while the government frames the change as long-term structural support."
John Webber Head of Business Rates at Colliers, said the announcements concerning business rates "constitute a dismal day for UK PLC and the High Street".
"Together with rises anticipated in the 2026 Revaluation, matters have been made even more costly for businesses, who overall will be facing higher business rates bills next April as business rates set to rise from £33.6 billion to £37.1 billion - a 10.2% increase.
"This is despite pre-election promises of business rates reform and 'saving the high street'."
Tim Attridge, head of ratings, CBRE, said the business rates announcement is a welcome relief for some but not all.
"Small businesses in the retail hospitality and leisure sector are to benefit from permanently reduced rates whilst large retail portfolios on the High Street and in the grocery sector will pay less in 2026 than in 2025.
"Other sectors will fare less well as draft values for the business rates tax will be published in the next 24 hours. Privately owned infrastructure will see bills rise between three to five times with pass-through costs to the consumer inevitable."
Colm Lauder of adviser Lauder Teacher said prime, modern logistics should stay well-supported. "Occupiers are still willing to pay for the right buildings in the right locations, so the best assets with strong specifications and genuine last mile utility will hold rental tone and value more effectively than the wider market.
“Higher business rates will not derail demand for logistics space, but they do reduce rental headroom at the margin. Where affordability is tighter, valuers will be more cautious on future rental growth and more open to modest outward yield pressure. The impact will be most pronounced for secondary industrial and older logistics stock. If the rates burden cannot be cleanly recovered, effective rents fall and void risk rises, so values become more sensitive to capex needs and covenant strength.”
Lauder said for for high value London offices, "obviously effectively all prime Grade A stock sits above the £500,000 RV line, so this suggests notable RV" rises to come.
"Higher rates there raise total occupancy costs just as firms are weighing footprint decisions, so valuers should expect more incentives."
Niki Fuchs, co-founder and CEO of London flexible office provider, Office Space in Town, said the overhaul will "suffocate investment, jobs, and the future" of our towns and cities.
"London’s flexible workspace sector is going to be strangled by an outdated tax policy that will reduce the city to Covid levels of decline. The move is clearly aimed more at boosting Treasury income and reducing administrative workload rather than supporting growth.”
That mansion on the hill
Reeves introduced a new mansion tax that will be an annual charge of £2,500 for residential properties worth more than £2 million and £7,500 for properties worth more than £5 million.
Reeves said this will be levied on owners and collected alongside council tax, saying it will raise over £400 million by 2031 and will be charged on fewer than the top 1% of properties.
Scott Cabot, head of residential research at CBRE, said: “On the face of it, the proposed mansion tax would apply to about 100,000 properties (so 0.4% of England’s total stock). We have examined the sales of all properties over £2 million-plus since 2020 and have unsurprisingly found that this would disproportionately affect homeowners in London and the South East."
Other tax changes
The Budget announced plans to create separate tax rates for property income. From 2027-28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current income tax powers in their fiscal frameworks. This will be legislated for in Finance Bill 2025-26 and take effect in early April 2027.
Cabot said: "Unfortunately, increasing the tax rate for property income is another blow for private landlords, and risks exacerbating the acute supply shortage of rental homes across the country.”
Regional commitments and industrial strategy pledge
Rachel Reeves said seven regional leaders would be receiving £13 billion of funding for local projects in her Autumn Budget.
She said the funding would be used by the mayors to invest in "skills, business support and infrastructure" and they will receive funding for 2026-27 to 2029-30 through their integrated settlements.
The regions are Greater Manchester, West Midlands, West Yorkshire, South Yorkshire, Liverpool City Region, the North East, and the Greater London Mayoral Strategic Authorities.
The Budget also updated on the government's modern Industrial Strategy with a string of investment pledges aimed at boosting productivity.
It said over the last quarter, more than £250 billion of investment commitments into the IS-8 had been secured, supporting 45,000 jobs.
New health centre one-stop-shops
The Chancellor confirmed investment for 250 new health "one stop shops" that will bring together GPs, nurses, dentists and pharmacists under one roof.
The centres will be part of a new Neighbourhood Health Service that will provide end-to-end care and tailored support.
Carly Caton, partner in commercial health at United Kingdom and Ireland law firm Browne Jacobson, said: “Leveraging private finance to build 250 neighbourhood health centres, earmarked as a central plank in the government’s 10 Year Health Plan to shift healthcare from hospitals to communities, is a wise move at a time of fiscal restraint."
Tourist tax
The government announced ahead of the Budget that England’s mayors will be able to introduce a new levy on overnight stays by visitors.
The fee would apply to visitors’ overnight trips, giving United Kingdom mayors, the government said, the same powers as their counterparts in cities like New York, Paris and Milan, where charges on short-term trips are commonplace.
The government confirmed it will introduce a cap of £5 million on relevant property trust charges for pre-30 October 2024 excluded property trusts. This will be legislated for in the Finance Bill 2025-26 and this will apply to trust charges from 6 April 2025. Reeves also said the the government would be selling government assets "we no longer have any use for".
Job done?
The message repeated on numerous occasions was that everyone in the country would need to contribute to ensure the United Kingdom paid down its national debt at the same as continuing to invest in economic growth. And that would continue to mean tough decisions on tax. Reeves will be hoping the financial markets are satisfied, as well as Labour's core voter base.
Royal Institution of Chartered Surveyors chief executive Justin Young reflected: “The Government faces many challenges, and RICS recognises the difficult balancing act it must play. There are positive moves, such as new support for apprentices under the age of 25, which should hopefully expand the pipeline of new talent into the surveying profession. It is encouraging that the Government is prioritising necessary reforms to the business rates system, and we are committed to supporting this effort through our members’ expertise.
“Whilst these changes are welcome, there are several measures which may weaken the housing market, such as raising tax on dividends, property, and savings income by 2%. Furthermore, it seems that commitments to sustainability are weakening. RICS is working with the Government to mitigate these effects and help it deliver its objectives."