George Osborne has delivered his "big Budget for a country with big ambitions". For the Real Estate Sector, there was a focus on residential (buy-to-let and inheritance tax featuring heavily) and social housing, but little progress on the all-important business rates reform.

copy of the full Budget can be found here and a copy of the BPF press releases can be found here. Some highlights are below.

Residential: buy-to-let

Mortgage interest relief for individual landlords of residential property will be restricted to the basic rate of income tax. This restriction will be phased in over 4 years, starting from April 2017. This is aimed at addressing the rapid growth of buy-to-let mortgages which the Bank of England has noted, in its recent Financial Stability Report, poses a risk to the UK's financial stability. This could have a serious impact on those investing in buy-to-let property with a potentially significant increase in tax bills impacting severely on profits. It appears likely this will affect individual landlords in partnership (as well as those holding property in their own right) which could also mean investors in partnership fund vehicles holding residential property could be affected. Conversely, there is no indication that corporate landlords will be affected. 
From April 2016, landlords of furnished residential property will only be able to deduct from their rental income costs which are actually incurred on furnishings (currently a 10% deduction for wear and tear is permitted, irrespective of expenditure). Again, this will impact on profitability.

Residential: inheritance tax changes

From April 2017 the Government is creating a new, transferable, nil-rate band which will apply when a main residence is passed on death to direct descendants, such as a child or grandchild. This will be up to £100k in 2017-18, up to £125k in 2018-19, up to £150k in 2019-20 and up to £175k in 2020-21. This will be in addition to the inheritance tax nil-rate band which is set at £325k for the estates of individuals. Any unused "main residence" nil-rate band will be capable of being transferred to a surviving spouse or civil partner. This main residence nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value are transferred on death to direct descendants. The details of how this works are at page 49.

There will be a tapered withdrawal of the main residence nil-rate band for estates with a net value of more than £2m (the withdrawal rate being £1 for every £2 over this threshold) and the existing nil-rate band will also remain at £325k until the end of 2020-21.

From April 2017 those who own residential property in the UK and would otherwise pay inheritance tax on that property cannot avoid paying it by holding the property in an offshore structure.

Residential: Help to Buy ISA

The Help to Buy ISA will be available from 1 December 2015. First time buyers can save £200 per month with a maximum Government bonus of £3k on £12k.

Social Housing

Rents in social housing in England will be reduced by 1% a year for 4 years. George Osborne expects the Housing Associations and Local Authorities to deliver efficiency savings to pay for this. Industry commentators have expressed concern about the impact this will have on those investing in the sector against rents which were previously index-linked. The Budget forecasts that this will create a 12% reduction in average rents by 2020-21 compared to current forecasts. 
Social housing tenants with household incomes above £40k in London and £30k in the rest of England will have to pay a market or near market rent for their accommodation. Housing Associations will be able to use the rent subsidy that they recover from these tenants to reinvest in new housing.

The Government has stated that it will review the use of lifetime tenancies in social housing with the aim of limiting their use.

Local Authorities will have £800m of funding for Discretionary Housing Payments over the next 5 years.

Business Rates

The Government's review of business rates continues. It has published some progress updates here, but the focus appears to be on tackling business rates avoidance and the appeals system. There is little indication that calculation methods will be overhauled.

Business rates avoidance is estimated to cost the Government 1% of total business rates revenue, equivalent to £230m. The anti-avoidance measures are to be announced in due course, and a close eye should be kept on developments in this arena as the original business rates avoidance discussion paper was wide reaching in its proposals for what might constitute avoidance.


There was a continuation of the clear message that tax avoidance was not going to be tolerated, with £800m being invested over the course of this Parliament in HMRC's work on non-compliance and tax evasion. The number of criminal investigations HMRC can undertake into serious and complex tax crime will be tripled. Legislation will be introduced to improve transparency of tax strategies and give HMRC new powers to tackle businesses who persistently engage in aggressive tax planning.

Legislation will also be introduced to rule out increases in income tax, VAT or National Insurance over the course of this Parliament.

Devolution and the Regions

  • Whilst London remains one of the world's greatest cities, there was continued recognition that the prosperity of the UK depends on the regions also doing well.
  • The Government is going to consult on devolving powers in relation to Sunday trading to city mayors and local authorities.
  • The Government is working towards further devolution deals with the Sheffield City Region, the Liverpool City Region, Leeds and West Yorkshire and partner authorities.
  • The Government will build on progress in devolving power to Greater Manchester which will include establishing a Greater Manchester Land Commission, granting the city region more powers of planning, subject to the agreement of the Cabinet member representing the district in which the power is used.
  • Bids are invited for a new round of Enterprise Zones.
  • There is a strong commitment towards the Northern Powerhouse and transport devolution in all of the city regions that elect a Mayor as well as counties, with a focus on Oyster-style smart and integrated ticketing systems.
  • Transport for the North will be established as a statutory body underpinned by £30m of funding over 3 years. Options for a TransPennine Tunnel will be reported on.


The Government has announced that it will review the Carbon Reduction Commitment Energy Efficiency Scheme (along side the Climate Change Levy) and its interaction with other business energy efficiency policies and regulations. A consultation will be launched in the Autumn and will be of interest to landlords who currently need to participate in this scheme.