Changes to UK real estate tax: reform and investment opportunities

For the highly taxed UK real estate industry, the Spring Statement was more about what wasn’t announced than what was. Analysis by the OECD (Organisation for Economic Co-operation and Development) revealed that the UK has the highest property tax burden in the G7.

When the Chancellor stood up to make her announcements, the UK real estate industry held its breath hoping for some good news about the myriad of taxes they pay. Unfortunately, all they got was a consultation on advance tax certainty for major projects. Nothing to help with stamp duty land tax (SDLT) increases that have now kicked in for the housing market, nothing to help with the business rates burden, and nothing to help with rising capital gains tax (CGT) rates.

Given the widely publicised small fiscal headroom following the 2024 Autumn Budget, which has since been eroded by sluggish growth, and global trade issues, it wasn’t necessarily a surprise that no help was announced in the Spring Statement. However, the average developed country pays 2.7% of its gross domestic product (GDP) in property taxes. In the UK, it is more than a third higher at 3.7%. Some help, no matter how small, would have been widely applauded by the real estate industry.

Addressing the real estate tax burden

Our Real Estate 360 survey reported in February that the overarching sentiment is that tax concerns, whether based on actual changes or perceived threats, have undeniably risen to the forefront of investment considerations. Respondents ranked the tax rules they believe should be reformed to increase investment in UK real estate evenly across the board, with 31% ranking CGT and stamp taxes above the rest.

As we haven’t yet perfected the art of time travel to go back and change what the Chancellor didn’t announce, what can she do in the future to help stimulate investment and drive the growth the government crave?

Certainty is important for long-term investment, so the consultation on advance tax certainty for major projects is welcome. Based on insights from our Real Estate 360 survey, more certainty was a key desire for foreign investors. Clear rules on key tax reliefs—such as interest deductions under the corporate interest restriction or capital allowances on capital investment—would help businesses assess whether projects are commercially viable. This certainty could accelerate investment decisions and increase investment in major projects.

However, the suggestion that the government might charge for this service is disappointing. The real estate industry is already highly taxed, and any additional costs could deter investment. Instead, a streamlined, clear process would be far more effective, ensuring faster decisions without adding unnecessary delays.

Our Real Estate 360 survey ranked tax rules that should be reformed/reduced to increase investment in UK real estate as CGT, stamp taxes, inheritance tax (IHT) and VAT. The government could start by examining these in terms of rates and/or simplification.

Key tax considerations for real estate professionals

Businesses involved in or planning major investment projects in the UK should consider submitting feedback on the consultation, which was launched on 26 March 2025 and closes on 17 June 2025. 91探花will be involved in the consultation meetings so if you do have any contributions you would like us to include in our response, please get in touch with Peter Graham.

While reformed/reduced taxes may be the ideal scenario for the industry, given the limited fiscal headroom, it seems unlikely that this will become a reality anytime soon. So, what can investors do now?

For professional and institutional investors, exploring the use of Real Estate Investment Trusts (REITs)—which are rising in popularity—may offer an effective strategy. Alternatively, the new Reserved Investor Fund, which the government has signalled will be introduced later this year, aims to offer more flexibility than the existing funds regime and could present opportunities for strategic tax planning.

For everyone else, tax modelling and including the true tax costs in investment forecasting could provide more clarity. This should include potential interest restrictions and the availability of any potential reliefs, such as capital allowances, to manage tax over the lifespan of an investment. In particular, while corporate tax has become more onerous in recent years due to rules like Corporate Interest Restriction, properly considering the rules and determining if any elections are relevant can be vital in ensuring maximum interest deductions are available.   

With over six months until the 2025 Autumn Budget, we would be interested to hear the real estate industry’s thoughts on what tax measures could be implemented by Rachel Reeves to try and reduce property taxation, increase investment and ultimately drive growth. Given the challenging global economic environment, the Chancellor would surely appreciate the help.

For further information on the consultation or to discuss real estate tax issues, please get in touch with Peter Graham or your usual 91探花tax contact.