On the 30th of October, Chancellor Rachel Reeves maintained the current Capital Allowance framework in the Autumn Budget 2024.
For commercial property owners, investors, and developers, the Budget has cemented some anticipated provisions without sweeping changes to the Capital Allowance framework—an outcome that could have long-lasting benefits for the sector.
Whilst a strong Capital Allowances framework will continue to be a major windfall for the sector, our team has provided the 5 key impacts of the Autumn Budget for the commercial property sector.
Capital Allowances: Stability Amid Fiscal Shifts
It’s no surprise that our key takeaway from the Budget is the government’s choice to preserve the existing Capital Allowance framework. As per the announcements, the full expensing regime remains unchanged, allowing companies to continue benefiting from 100% first-year allowances on qualifying new main-rate plant and machinery. For special-rate plant and machinery, the 50% first-year allowance has also been maintained.
“This budget is a notable assurance for property owners and developers, as these allowances allow businesses to reclaim significant portions of qualifying investments, making capital-intensive projects financially viable.”
– Miguel Ramskill, Associate Director
The continued stability of Capital Allowances provides certainty for those planning property refurbishments, upgrades, or energy-efficient installations. By maintaining this robust tax relief mechanism, the government is encouraging commercial property stakeholders to move forward with plans that enhance asset value while aligning with longer-term goals like sustainability and efficiency improvements.
This is particularly relevant for businesses facing rising costs from other fiscal and economic pressures, as Capital Allowances provide a critical financial cushion.
Capital Gains Tax (CGT) Changes: Implications for Investors and Property Owners
The Autumn Budget also introduces changes to Capital Gains Tax (CGT), notably impacting higher-rate taxpayers. While full details are still emerging, any increase in CGT rates could mean that investors and developers who sell assets may face a steeper tax burden on their gains. This could lead to strategic adjustments in property transactions and a possible shift in holding periods as investors balance immediate gains with long-term capital appreciation.
For commercial property owners, understanding these CGT adjustments will be crucial, especially for those considering the sale of assets in the near future.
“Higher CGT rates may prompt property owners to explore reinvestment strategies or use Capital Allowances to offset gains, thereby optimising their tax liabilities.”
– Duncan Chittick, Managing Director
This trend could spur increased interest in lease extensions, property reinvestments, or enhancement projects that boost property value without triggering immediate CGT liabilities.
Impact on International Property Owners: A Shift in Strategy
The move from a remittance basis to a residence-based tax regime starting in April 2025 will reshape how non-UK domiciled investors approach UK commercial property. This change could make the UK less attractive as a tax-friendly investment destination, potentially reducing the influx of international capital.
We anticipate two core follow-on impacts:
- Strategic Adjustments: Non-domiciled investors may need to rebalance foreign assets before the new regime takes effect, using the rebase option for CGT to 5 April 2017. This could encourage reassessments of property investments and consideration of domestic tax strategies aligned with the evolving landscape.
- Professional Advisory: Heightened demand for specialised tax advice is already evident, with property owners seeking to navigate these changes and optimise investments while remaining compliant.
Focus on Energy Efficiency: Opportunities Through Capital Allowances
In line with net-zero targets, the Budget has highlighted initiatives designed to foster energy efficiency across sectors. For commercial property owners, energy-efficient upgrades are increasingly becoming a competitive necessity. With sustainability at the forefront of government and investor priorities, Capital Allowances on energy-saving investments represent a compelling route to improved financial and environmental outcomes.
“The continuation of 100% and 50% allowances on qualifying assets means that property owners can mitigate the initial costs of energy-efficient installations such as lighting, HVAC systems, or renewable energy sources.”
– Adam Louth, Head of Surveying
These investments not only reduce long-term operational costs but also align properties with increasingly strict energy regulations. For owners of older buildings, these allowances can transform essential upgrades into opportunities for substantial tax savings, boosting asset appeal and market value.
Encouraging Long-Term Investment Amid Economic Uncertainty
The government’s agenda, amid a challenging economic landscape, sends a clear message: long-term investment is still highly valued. For commercial property owners and developers, this continuity provides reassurance that supports sustained investment despite market uncertainties.
By maintaining Capital Allowances, the government is fostering an environment conducive to upgrades and investments in energy-efficient technology, all of which enhance property value and align with broader economic and environmental goals. This stability is critical at a time when commercial property values are fluctuating and the sector faces high interest rates and rising operating costs.
In sum, the Autumn Budget 2024 presents a mixed yet stable landscape for commercial property stakeholders. The continuation of generous Capital Allowances and the AIA reflects a strategic approach to supporting the sector’s growth and sustainability aspirations. For commercial property owners, this Budget encourages capital deployment in ways that enhance both financial returns and asset resilience.
As the sector navigates economic headwinds, tax relief mechanisms like Capital Allowances remain invaluable tools. By using these provisions strategically, property owners can improve their immediate financial positions while securing long-term growth.age Capital Allowances to optimise your tax position, reach out to our team for tailored advice.
