Commercial Property: The Budget, What to Expect and How to Prepare

Learn about the potential contents of the upcoming Budget for Commercial Property, including likely changes to Capital Gains Tax, business rates, corporation tax, and discover how RLK Solicitors can help you prepare effectively.

Understanding the Potential Changes in the Budget

The upcoming Budget is expected to be one of the most closely watched financial events for commercial property owners in recent years. With the UK government under pressure to raise revenue while supporting economic growth, property investors and business owners alike are preparing for a range of possible tax and regulatory shifts.

At present, speculation centres on Capital Gains Tax (CGT), business rates relief, and the corporation tax rate. Each of these could significantly affect the profitability and operational costs of owning or managing commercial property.

Capital Gains Tax (CGT): What Could Change?

The Capital Gains Tax (CGT) system is widely tipped for reform. While no firm announcements have been made, analysts predict potential increases in CGT rates or a reduction in the annual exemption allowance.

For landlords and property investors, this could mean higher liabilities when selling assets or restructuring portfolios. The government’s motivation appears clear: to generate additional revenue from “unearned” income, such as property and investment gains, rather than from working individuals.

How CGT Adjustments May Affect Commercial Property Owners

Consider a property owner selling a commercial building acquired several years ago. If the CGT rate were to rise by even 5%, their net profit could shrink substantially, particularly for high-value assets. Similarly, if the annual exemption allowance, the portion of gains exempt from tax were reduced, more property owners would face increased tax bills.

Business Rates Relief: Continuity or Cutbacks?

The government has already confirmed that business rates relief will continue for retail, hospitality, and leisure sectors through 2025/2026. However, beyond that, there is speculation that relief for small businesses may be scaled back or withdrawn.

Business rates are a major overhead for many commercial tenants. Even a modest increase in liability could strain margins, particularly in sectors still recovering from inflationary pressures and shifting consumer habits.

The Impact of Reduced Business Rates Relief on Small Businesses

If reliefs are curtailed in the 2026/2027 period, smaller enterprises could face higher fixed costs. This could prompt a wave of renegotiations of lease terms or even property disposals as businesses seek to manage cash flow more efficiently.

Corporation Tax and Investment Income Adjustments

The headline corporation tax rate is expected to remain at 25% for the financial year beginning April 2026. However, some analysts warn that changes to how investment income and capital gains are taxed could indirectly affect corporate property owners.

While the headline rate remains stable, tweaks to deductions, allowances, or investment reliefs could shift the effective tax burden, particularly for property holding companies and investment vehicles.

Understanding the Wider Tax Environment

Alongside traditional taxes, there is talk of new levies on unearned or investment income. Such measures could rebalance the tax landscape and alter how returns on property assets are calculated. For commercial investors, this underscores the importance of comprehensive financial planning and legal structuring ahead of the budget.

Other Influencing Factors Beyond Tax

Market Caution and Its Effects on Buyers and Sellers

In uncertain economic climates, both buyers and sellers often adopt a “wait and see” approach. The anticipation of tax changes may slow transaction volumes, delay investment decisions, or encourage owners to hold assets until post-budget clarity emerges.

Government Priorities and Fiscal Policy Direction

Given the broader fiscal pressures, the government’s strategy will likely focus on revenue generation rather than new spending. By targeting investment and capital income, policymakers can boost receipts without directly impacting everyday consumers, a politically palatable move during times of fiscal constraint.

Preparing for the Budget: What Commercial Property Owners Should Do Now

Reviewing Your Property Portfolio and Timing Transactions

If you’re considering a sale or restructuring, it may be wise to act before the budget if you suspect higher taxes ahead. RLK Solicitors can provide timing analysis and transaction advice to minimise future exposure.

Evaluating Business Structures and Tax Efficiency

A well-structured corporate setup can significantly influence your tax position. For example, operating through a limited company or holding entity might offer better flexibility under new rules.

Seeking Professional Advice Early

Proactive engagement with both solicitors and tax advisors can make the difference between opportunity and risk. Early action enables you to plan for multiple budget scenarios effectively.

How RLK Solicitors Can Help You Prepare

Commercial Property Transactions and Structuring

Whether buying, selling, or restructuring your property portfolio, RLK’s team provides strategic transaction support and ensures you remain aligned with all regulatory requirements.

Tailored Legal Solutions for Business Clients

From retail to hospitality, RLK understands the unique challenges faced by different sectors. Their solicitors deliver bespoke, industry-focused legal support that anticipates and adapts to government policy changes.

The Budget for Commercial Property presents both challenges and opportunities. While the specifics remain uncertain, proactive planning and professional guidance can help you navigate potential changes with confidence.

RLK Solicitors stand ready to help commercial property owners, investors, and businesses prepare for any outcome, ensuring you remain compliant, protected, and positioned for long-term success.