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UK: Chancellor Rachel Reeves has just delivered her second budget in the House of Commons.
Despite a feverish atmosphere in the chamber, the announcement itself was something of an anticlimax, as large parts of it had been leaked an hour earlier in an online report posted by the Office of Budget Responsibility.
Here are the main elements of the budget that will affect the living, flex workspace and hospitality sectors, with industry reaction below. The reaction section will be updated throughout the day.
- A reinforcement of the government’s long term intention to deliver planning reform aimed at increasing housing supply. The updated OBR modelling incorporates the assumption that successful reforms could gradually lift annual housebuilding and provide a modest easing of price pressures over the next decade
- Legal minimum wage for over-21s to rise 4.1 per cent in April, from £12.21 to £12.71 per hour
- Mansion tax: A council tax surcharge on properties worth more than £2 million (£2,500 annually) going up to £7,500 annually on properties worth more than £5 million
- Lower tax rates for more than 750,000 retail, hospitality and leisure properties
- Freezing tax thresholds on personal tax and employer National Insurance contributions thresholds for three years from 2028/29
- Increasing the tax rates on dividends, property and savings income by 2 percentage points
- Corporation tax change: Reducing the writing down allowance main rate in corporation tax – £1.5bn;
- Electric vehicles: A new mileage-based charge on battery electric and plug-in hybrid cars from 2028
- Reduced capital gains tax relief (from zero to 50 per cent) on disposals to employee ownership trusts
- A freeze to fuel duty for a further five months, followed by staged increases from 2026
Reaction
“Despite our repeated calls this year for the Government to ‘pull the Build to Rent lever’ to deliver the additional, good quality new homes in such great demand, the absence of direct support for the Build to Rent sector in today’s Budget is disappointing. The Build to Rent sector has now delivered over 132,190 new homes, an uplift of 14% nationally year on year, as reported by Savills, but it has the potential to deliver 2,000,000 additional new homes – a meaningful contribution to addressing the national housing crisis. Viability however remains a real issue for the Build to Rent sector. A triumvirate of stubbornly high development costs, convoluted planning processes and an increasingly demanding regulatory environment is slowing construction. The Government has not yet grasped how, from an investor’s perspective, to make the UK a more attractive destination, and to make housing, and in turn Build to Rent, an attractive sector to invest in. The Government fails to recognise that planning, building control and the Building Safety Act are viewed as one substantial hurdle by the investment community and this is where fiscal resource and regulatory coordination is required to attract the private capital required and that is ready to be deployed.”
Brendan Geraghty, chief executive The Association for Rental Living
“Once again there are warm words on planning capacity but no resource behind it. Growth cannot be driven through planning reform when local authorities lack planners to deliver decisions. Reform alone will not clear the backlog when development remains constrained by accumulated regulation and compounding taxation. Until planning departments are properly resourced, delivery will remain blocked regardless of policy rhetoric.”
Andrew Teacher, co-founder at Lauder Teacher
“When it comes to housing delivery, the industry is inclined to take government claims with a bag of salt rather than a pinch. Time and time again we have heard recycled rhetoric about boosting housing supply and time and time again we have watched successive governments fall well short of their own targets. The commitment to long term planning reform is welcome in principle, but the sector now needs to see genuine delivery rather than another round of ambition without action. New housing supply is vital in preventing prices from becoming artificially inflated and in creating genuine routes into homeownership for aspiring buyers. Without a steady pipeline of homes, affordability remains stretched, mobility stalls and the next generation struggles to take its first steps onto the ladder. If the government is serious about addressing the structural issues in the housing market, then it is time to walk the walk instead of simply talking the talk.”
Adam Day, head of eXp UK and Europe
“Despite claims of tackling cost of living pressures, the Government is pursuing a policy that the Office Budget Responsibility has made clear will drive up rents. Almost one million new homes to rent are needed by 2031. But this Budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”
Ben Beadle, chief executive of the National Residential Landlords Association
“While the housing market was looking for certainty from the Budget, the cards that have been dealt may well have the opposite effect to intended. Residential landlords with smaller portfolios who, unlike larger operators better placed to absorb rising costs and obligations of the Renters Reform Bill, will need to rethink their portfolio or potentially exit. An exodus from the rental market may cause rents to soar, leaving tenants in a very difficult position of being unable to save to buy even if rental properties are up for sale. Both need to play a role in the housing mix to ensure people have a roof over their head. It is clear the property market needs some serious evolution as the fall through rate of transactions and associated costs have been a major barrier for growth. We have already seen that those looking to sell their homes quickly, be it exiting landlords or homeowners looking to avoid potential tax increases, are looking to auctions for faster, more secure sales. Numbers of landlords and high-value homeowners coming to auction have increased in recent times giving an opportunity for larger property companies to increase their stock or diversify into residential rental at a lower price. We are starting to see first-time buyers use the auction route too, but too few are aware they can get a mortgage for an auction – the plans to make mainstream more like auction could be a significant help.”
Andy Thompson, Director at Eddisons, part of Begbies Traynor Group
“The rise in property income and dividends tax presents all types of landlords with yet another obstacle to adapt to at a time when they are already absorbing significant operational changes under the Renter’s Rights Act. Despite this additional pressure, the sector remains profitable, but the margin for error is undoubtedly narrowing. Smaller individual landlords, in particular, now face a more complex environment where every regulatory and financial shift has a meaningful impact on day to day decision making. What this change really highlights is the growing need for professional guidance. Amateur and accidental landlords will be even more reliant on the expertise of their letting agents to help them navigate the increasing administrative, compliance and operational demands of modern property management. The rental market is evolving quickly and remains a fundamentally strong asset class, but support and clarity are becoming more essential with each policy adjustment. Ensuring landlords have access to the right advice will be key to maintaining confidence and performance in the years ahead.”
Sam Humphreys, Head of M&A at Dwelly
“It’s alarming that the Budget has left in place an avoidable and unproductive double-whammy tax on serviced offices. The VOA’s approach is already inflating rateable values, and the super multiplier then adds another layer of cost. Together, they create needless pressure on a sector that underpins thousands of small businesses. Operators are now facing bills based on valuations that simply don’t reflect how flexible workspaces operate or the value they provide. The impact is already clear. These combined measures are pushing costs to unsustainable levels and putting many centres at serious risk. Unless this is fixed, the UK stands to lose a vital part of the small business ecosystem that depends on accessible and adaptable workspace.”
Jane Sartin, executive director of the Flexible Space Association
“It’s pleasing to see the Government recognise that increasing resource for local planning authorities is crucial to unblocking delays in the planning system. Today’s announcement sees £48m of extra funding to boost capacity and the Government anticipates there will have been 1,400 recruitments across the planning system by the end of its term. However, most developers will recognise that this will merely make a dent in the overall number of undetermined planning applications stacking up. The situation isn’t helped by new layers of regulation constantly being applied – the most recent being biodiversity net gain, which many planning authorities are still struggling to get to grips with. The Planning and Infrastructure Bill reforms may have a small streamlining effect, but even then planning officers need to spend time getting up to speed with it. If the Government really wants to speed things up, it either has to remove large amounts of the regulations which currently apply to planning applications, or it has to massively increase the funding available to local planning authorities. Unfortunately, I don’t think we can guarantee on either happening and so I suspect we might still be in the same position in 2029 when the next election comes around.”
Matthew Scudamore, planning partner at Gateley Legal
“Once again Rachel Reeves has claimed to be on the side of startups – whilst revealing she doesn’t understand them. The decision to treat flexible and serviced offices as one large property rather than multiple smaller units means startups face higher costs. The business plans being written by aspiring founders across the UK just got more expensive. It’s simple – fast growing businesses choose flexible workspaces over traditional leases. But now changes to business rates mean they’ll no longer get Small Business Rates Relief if they work in a flexible space. Our spaces are not classed as individual offices, and we cannot apply small business rates relief for the businesses we host because our flexible workspace is treated as a single unit. We will have no choice but to pass this cost on, making flexible workspaces more expensive for SMEs to access – at the very time when getting people back into high-quality offices is critical for driving productivity. Access to flexible workspace – which is generally more affordable than committing to a single unit – has never been more important for SMEs, especially as the cost of space in our cities continues to soar and when business want to get people back into the office. I’d like to finish this quote by saying most of all I’m just glad this is over – and next time can we not spend half the year talking about the budget and creating uncertainty, please”
Natasha Guerra, founder of Runway East
“On a more positive note, renewed funding for the Lower Thames Crossing signals intent to push ahead with major infrastructure. Such projects typically bolster confidence among developers, investors and buyers. Over time, improved connectivity should lift demand, and eventually values, across parts of east and south-east London. Rather than driving capital out, the Budget is more likely to redirect it within UK housing. Foreign, institutional and private-credit investors are expected to continue favouring mid-market, income-led residential assets, build-to-rent, PBSA, single-family rental, affordable and suburban schemes, while relying more heavily on credit strategies as banks remain cautious.”
Daniel Austin, CEO and co-founder at ASK Partners
