Real Estate 360° | 2025
Tax
Perception or reality fuelling tax concerns?
The UK real estate sector is highly taxed, which is consistently viewed as an investment barrier. This year, concerns have risen, with 35% of respondents citing additional tax restrictions as a barrier, closely followed by business rates at 33%.
The autumn budget has intensified concerns, both for corporate entities with real estate assets and for individuals. Increased tax rates, such as higher capital gains tax and stamp taxes, have heightened taxpayer anxiety and raised concerns about future tax rises.
The overarching sentiment is that tax concerns, whether based on actual changes or perceived threats, have undeniably risen to the forefront of investment considerations. Respondents ranked the tax rules they believe should be reformed to increase investment in UK real estate evenly across the board, with 31% ranking capital gains tax and stamp taxes slightly above the rest.
Which of the following tax rules should be reformed/reduced to increase investment in UK real estate?
Top 5 responses
Capital gains tax
Stamp taxes
Inheritance tax
VAT
Corporation tax
Specific tax changes have had noticeable impacts. Adjustments to inheritance tax, particularly regarding agricultural and business property relief, have been significant. The main corporation tax rate increased from 19% to 25% in 2023, and its effects are being felt as we enter 2025.
Tax simplification needed
The complexity of the tax system is a critical issue. Over one-fifth of businesses surveyed highlighted the need to simplify the tax system overall, despite the government’s recently published corporate tax roadmap. Complexity has increased in recent years, with additional administration costs and disclosures being introduced. Changes to rules regarding associated companies have accelerated payment for certain groups, impacting cash flow and increasing penalties. The closure of the Office of Tax Simplification in 2023 has created further uncertainty.
Peter Graham
Tax Partner, RSM
“Maintaining a stable and predictable tax regime is crucial. Investors value stability and are more likely to commit to long-term investments when they have confidence in the tax environment.”
The outlook - reducing the tax burden
There are various tax options to explore. Larger funds have more options to minimise their exposure, for example, by considering the Real Estate Investment Trust (REIT) regime. The government signalled it will proceed with the introduction of the Reserved Investor Fund (RIF) this year, which may be attractive to funds. For all businesses, utilising reliefs, including capital allowances or land remediation relief where applicable, should be considered.
2024
new real estate companies were incorporated in the UK
higher than the monthly average across the last four years
Source: Beauhurst
Real estate businesses must effectively consider tax as part of overall transaction costs when forming investment decisions. Smaller property investors face more limited options and may be more exposed. This year, property company incorporations spiked as private individuals formed corporate structures, with tax structuring being a significant driver.
