In advance of the Chancellor’s first Spring Statement on 26 March, what can businesses in the real estate sector expect to see announced?
Although Rachel Reeves had previously ruled out further tax rises following the significant announcements made in the Autumn Budget, and having previously committed to only one major annual fiscal event, the Chancellor faces increasingly difficult choices because of the performance of the UK economy and the significant impact of world events.
Does this mean that we will see new tax-raising measures announced, or, as many are speculating, will Reeves focus on reducing spending?
What is the chancellor expected to announce?
Zoe Roberts, partner and property specialist, comments: “Reeves has committed to one major economic event – the Budget – each year. I’m not, therefore, expecting any major tax policy announcements, particularly given the changes announced at the Autumn Budget. Indeed, the consistent message from Government sources has been that this event is not a major one because it will not include tax rises. I expect that we will instead hear a pretty dire forecast from the Office of Budget Responsibility and a statement focussing on a need for increased borrowing and the already well-publicised plans for spending cuts, with welfare reform and projects to create efficiencies within the NHS and civil service likely to take the headlines.”
Tom Roseff, partner, adds: “It remains to be seen what the Government’s announcements will mean for the real estate sector, but our experience is that any cuts to spending on infrastructure spending will inevitably be felt hard within the construction sector, which has generally been a solid barometer of UK business confidence. The expected reforms to public spending plans will also likely impact the wider economy, potentially slowing an already sluggish housing market as confidence dips and many find themselves with less money in their pockets.
Whilst major tax policy announcements seem unlikely, most likely being reserved for the Autumn Budget, I wouldn’t be at all surprised to see further freezing of the current tax thresholds, pulling more individuals into higher tax brackets.”
Roberts adds: “What’s clear is that we live in increasingly uncertain times. An unpredictable President in the White House, an escalating tariff war and increasing global instability all present major challenges to the Chancellor. The choices are, however, stark: either raise taxes or cut spending. Neither are likely to be welcomed by already struggling businesses.”
What are we unlikely to see announced?
Despite widespread protests, we expect that the Government will not back down on the major changes made to the Inheritance Tax regime, potentially affecting a large number of family farms.
Any further changes to the CGT regime also seem unlikely. That said, whether the much-mooted alignment of CGT and income tax rates will be revisited in the Autumn remains to be seen.
Whilst there has been some speculation that announcements may be made around the pension’s tax-free lump sum, it seems unlikely that we will see this referenced on 26 March. Such changes would be complex and far-reaching and would most likely be better addressed within the Autumn Budget.
What action should businesses be taking?
Against the current backdrop of economic uncertainty and the likelihood of future tax rises, businesses would be well advised to ensure that they have a tight handle on the numbers. Being able to rely on good quality real-time management information and accurate cash flow forecasts will allow businesses to respond quickly to challenges.
Roberts comments: “We are seeing an increased level of enquiries from businesses in the real estate sector who are seeking to restructure to better protect valuable assets from the risk of future uncertainty. We are also working extensively with clients, recognising the benefits that real-time financial reporting can provide via the use of cloud accounting. It’s a trend we expect to see continue this year.”
BHP will follow the Spring Statement on 26 March 2025 and looks forward to sharing our comments.
