John Healey's First Budget - Tinkering at edges

Chancellor of the Exchequer, Rt Hon John Healey MP, announces increase in the Business Rates Relief with the threshold increasing from £12,000 to £18,000 for Retail, Hospitality and Leisure businesses - impacting some 70,000 businesses with all other rates 'frozen' for two years.

Healey advised that these Rates changes will be funded by increased taxes on gambling and vape retailers as well as online.

Smoke and Mirrors - as usual - the devil is always in the detail!   Whilst sounding 'positive' as a 'boost ' to First Year Allowances (FYAs) on new investment via Capital Allowances by increasing the FYAs from 40% to 50% on NEW investment.

However, this is contrasted (and funded by) a further reduction in the normal Writing Down Allowances (WDAs) to be reduced further from 14% to 12% per annum.

The Red Book Table 6.1 (item 58) Budget 2026 Policy Decisions illustrates that this change generates £5.225bn for Government through to 2031/32 from reducing the rate of WDAs - AFTER taking into account the increased FYAs!!

So much for simplifying tax and encouraging investment into UK!

The maths is significantly in favour of HM Revenue & Customs and HM Treasury rather than businesses investing in means of production, growth and resilience.

Could impact the development of Data Centres and other Nationally Significant Infrastructure Projects (NSIP) as global investors consider better returns on investment outside UK - whether as datacentres, windfarms, ports, airports and other  important facilities across energy, data, AI, water and telecoms.

There are also some responses to the Predevelopment Expenditure consultation that ran over the summer...more on that as we review the document and Government's initial reaction to the responses they received in due course.

Rt Hon John Healey, announced new 'Data Centre Covenant' to support Artificial Intelligence (AI) and data used by essential to UK health, defence and industry to be located within UK.

These UK based facilities will drive investment in UK to protect jobs and water with 'guaranteed' rights to onsite power generation - that these 'hungry' assets require.  

If the reduction in Writing Down Allowances doesn't discourage such an investment.

Today's Budget Statement also announced and intention to enable Local Authorities to retain 100% of their respective Business Rates by "end of the decade".

Some might argue that is 2029 but could be 2030?

This is to commence with 20% of Business Rates to LPAs in 2027 fiscal year and then  further sharing of tax revenues from 2028 when the Government intends to share some of the of Income Tax receipts to Devolved Mayors.

A bounty to help encourage devolution, perhaps?

In recognition of the impact of significant Building Regulatory changes over the last few years and the delay on housing growth and delivery the Chancellor announced a freezing on new changes to Building Regulations other than on critical safety grounds to simplify building requirements and allow the sector to accelerate delivery.

Additionally, Healey announced the exemption of brownfield sites (up to 1.5 hectares) from the Biodiversity Net Gain requirements (BNG) in England.

With the Red Book stating that "In parallel, #BNG will become mandatory for Nationally Significant Infrastructure Projects from November 2026, ensuring the country’s largest developments make a strong contribution to nature recovery."

Additionally it was announced that there would be a £330m allocation to address homelessness and rough sleeping

As we digest more of the publications issued alongside the Budget over the coming days and weeks we will look to update and expend on our initial reactions here.

If you would like to discuss any property tax matters or specific queries relating to the above information, then please do contact the team on 0345 230 6450 or [email protected]. We look forward to speaking with you soon.