The Mini Budget has introduced a number of immediate tax changes, and has promoted a series of initiatives that could have a major impact on residential and commercial development in England. 

It will be interesting to see if the Stamp Duty Land Tax (SDLT) changes stave off a predicted decline in residential transactions and residential prices. It will also be interesting to see where the new 'Development Zones' and 'Investment Zones' are established and whether these promote a net increase in the amount of development or just reallocate projects and schemes to other areas of the country.

Stamp Duty Land Tax

From today (23 September 2022) the threshold at which residential SDLT must be paid will be doubled to £250,000.

The threshold at which first-time buyers begin to pay SDLT is increasing from £300,000 to £425,000 and first-time buyers’ relief will be eligible on more expensive properties, with the threshold now £625,000. These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up to £8,750 in relief. This will be of particular assistance in London and the South East where fairly ‘entry level’ homes can be very expensive.

The higher rates for second time buyers, and the surcharge for purchases by non-UK residents, will both still apply.

Development and Investment Zones

Specified areas of the country will benefit from tax incentives, looser planning rules, and wider support for the local economy in order to drive growth and in particular new housing development.

It appears that there will be an overlapping concept of deregulated ‘Development Zones’, and ‘Investment Zones’, being areas with beneficial tax treatment. So a given area could be within one or both of these zones.

There are apparently 38 local authorities in talks with Government on establishing investment zones, including the GLA, Southampton City Council and Dorset Council. There is an indication that this policy is meant to supplement and not replace freeports.

Particular policies promised today include:

  • Lower taxes for businesses in designated sites;
  • Streamlining current planning applications in these areas; and
  • Commitment to potentially disapplying “legacy EU red tape” where appropriate if this is holding up the grant of planning permission.

The Treasury are also considering the following, which would appear to be applicable in ‘Investment Zones’:

  • 100% relief from business rates on newly occupied business premises in the Investment Zones;
  • Councils to receive 100% of business rates growth in designated sites, over an agreed baseline, for a period of 25 years. At this stage it is not clear whether the rates relief will apply to new lettings of existing buildings, or just to newly built premises;
  • Enhanced capital allowances for qualifying expenditure for assets for use in these tax sites;
  • Enhanced structures and buildings allowance;
  • A zero rate of employer’s National Insurance contributions for the salaries of any new employee working in an Investment Zone for at least 60% of their time on earnings up to £50,000 pa; and
  • A 100% SDLT relief for land and buildings bought for use or development for commercial purposes and for purchases of land or buildings for new residential development. This will clearly be of particular interest to developers and investors and it will be interesting to see how extensively this SDLT relief will be applied across the country.

There is a renewed commitment to promote the disposal of surplus public sector land. There is an indication that planning reform will be brought forward and a whispered signal that this will focus on parts of the country where people actually want to live and work not just in deprived parts of the UK. There is a tension between allowing more development in the South East and Thames Valley, to promote further growth, and levelling up in the North and Midlands and encouraging growth there.

New legislation is going to be brought forward “in the coming months” to reduce “unnecessary burdens” and speed up the delivery of much-needed infrastructure including new housing. This includes:

  • reducing the burden of environmental assessments;
  • reducing bureaucracy applying to the planning consultation process; and
  • reforming the habitats and species regulations.

There will be a series of national policy statements for energy, water resources and national networks.

There will be also be amendments to the Product Security and Telecommunications Infrastructure Bill to let telecoms operators get easier access to telegraph poles and private land supporting the delivery of gigabit capable broadband. It sounds like these could be similar to the powers that operators of mobile data networks have, which could concern landowners with overhead lines across their land.

In summary, there are a lot of immediate changes and potential future changes for developers, investors, and home buyers to consider.