scruttonbland.co.uk
PROPERTY AND CONSTRUCTION
Autumn 2025
Sweat Equity: Building Wealth Through Property Improvement
A Quick Guide to Making Tax Digital
UK Housing Market: Will the Autumn Budget Deliver a Lifeline?
Contents
3 Welcome to the Autumn Edition of our Property And Construction Newsletter
10 Making Tax Digital: A Quick Guide for the Construction Industry
12 What FRS102 Lease Accounting Changes Mean For The Property and Construction Sector
4 Can Construction Hold the Line as Business Confidence Wavers?
6 Sweat Equity: Building Wealth Through Property Improvement
14 Meet the Team
8 W ill the Autumn Budget Deliver a Lifeline for the UK Housing Market?
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Welcome to the Autumn Edition of our Property And Construction Newsletter
As we move through the final quarter of 2025, and with this year’s Autumn Budget just around the corner, the Property and Construction sector is continuing to still feel the ripple effects of the 2024 Autumn
Budget and wider economic shifts.
C onfidence across the sector remains mixed, but there are some signs of stabilisation in the housing market and cautious optimism in commercial property. In this edition of our newsletter, we take a closer look at the sector over the last quarter, including insights from the ICAEW Business Confidence Monitor and what they mean for property and construction businesses across East Anglia. We explore the concept of sweat equity, a growing trend among developers and investors looking to unlock value through hands-on involvement rather than capital injection.
And with the housing market still adjusting to base rate changes and affordability pressures, we examine what’s happening locally and nationally, and what might lie ahead. For the self-employed, Making Tax Digital is fast approaching, so we’ve broken down what you need to know to stay compliant and prepared as a construction business or landlord. Meanwhile, changes to lease accounting under FRS 102 are set to impact how property assets are reported, particularly for those with significant leasehold interests. So we outline what this means for your financial statements. As always, we hope you find this edition informative and thought-provoking. If there’s a topic you’d like us to cover in future issues, or if you’d like to discuss any of the points raised, please don’t hesitate to get in touch with me or your usual Scrutton Bland contact.
Ben Cussons Business Advisory Partner ben.cussons@scruttonbland.co.uk 0330 058 6559
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Can Construction Hold the Line as Business Confidence Wavers?
UK business confidence has taken a notable hit over recent months. The latest ICAEW Business Confidence Monitor revealed a sharp decline in sentiment heading into Q4 2025, and the national index fell to -7.3, its lowest level since late 2022, reflecting widespread caution across sectors.
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A ccording to the Institute of inception in 2016. This downturn is unfolding against a backdrop of growing nervousness about the upcoming Autumn Budget 2025, due on 26 November. Many businesses still remain unsettled by the Chancellor’s 2024 Budget, which introduced £40 billion in tax rises, including increases to employer National Insurance contributions and capital gains tax. And, whilst the government pledged not to raise income tax, VAT, or National Insurance again, speculation persists and other fiscal levers - such as threshold Directors, confidence among business leaders is at a record low, with their index plunging to -74, the weakest reading since its freezes, pension relief reforms, or inheritance tax adjustments - may also be used to plug a projected £40–50 billion shortfall. A resilient but under pressure sector Amid the broader decline, the construction sector does stand out for its relative resilience. In fact, in Q3 2025, despite the sector’s confidence dropping from +4.7 to +1.8, below the sector norm of +3.8, it remained positive and is in stark contrast to the UK average of -7.3. This positions construction as one of the more optimistic sectors, second only to Energy, Water & Mining. Strong domestic sales expectations and ongoing demand in housing and infrastructure projects have helped sustain such sentiment. However, the sector is not immune to mounting pressures:
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Capital investment plans remain above average, but R&D budgets continue to stagnate, raising concerns about long-term innovation and competitiveness. Input price inflation has eased, offering some relief, but labour cost pressures persist, and firms remain exposed to global supply chain volatility and delayed public sector decisions.
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Budget uncertainty dampens investment Across the economy, businesses are scaling back investment plans and delaying hiring decisions. With many adopting a “wait and see” approach ahead of the Autumn Budget, wary of potential changes to tax policy and regulation. This lack of clarity is already affecting confidence, particularly in sectors reliant on long-term planning and capital expenditure. As ICAEW CEO Alan Vallance warns, “If the government is to come good on its growth mission, it must demonstrate that it is firmly on the side of business.” Making the Autumn Budget a critical moment - not just for fiscal policy, but for restoring confidence across the business landscape. We’re here to help If you’re operating within the construction sector, you may be looking to review your strategic plans in line with the Budget. Whether you’re considering capital investment, navigating tax changes, or addressing workforce challenges, we can help you to assess the risks and identify any opportunities.
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Tax burden is a major concern, with 73% of construction firms citing it as a growing issue - the highest proportion across all sectors. Regulatory pressures have reached a new survey high, adding complexity to project delivery and compliance. Skills shortages remain acute, particularly in management and technical roles, threatening productivity and growth. Customer demand is showing signs of softening, especially in commercial construction, as clients delay decisions amid fiscal uncertainty.
Helping your business to stay resilient and responsive in the face of policy shifts.
Get in touch with one of the team today by calling 0330 058 6559 or email hello@ scruttonbland.co.uk to arrange a review that’s tailored to your needs. You can read the full ICAEW Business Confidence Monitor for Construction Report here: https://www.icaew.com/technical/ economy/business-confidence-monitor/ construction
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Sweat Equity: Building Wealth Through Property Improvement
In today’s property market, one of the most powerful tools for aspiring investors isn’t just capital—it’s sweat equity.
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I t’s a term often referenced in the unpaid work and time that business owners put in to build a business, that we’ve covered before here. But it’s also one that refers to the value added to a property through personal effort, such as renovations, refurbishments, or strategic upgrades. In this article, Ben Cussons, Business Advisory Partner looks at how for many, it’s the gateway to building a robust property portfolio without needing vast upfront funds. What is sweat equity in property? Sweat equity is the increase in a property’s value resulting from improvements made by the owner. Whether it’s a kitchen upgrade, loft conversion, or full refurbishment, these enhancements can significantly boost market value and rental potential. For example, purchasing a dated property at a discount, investing time and money into renovations, and then revaluing the property can unlock equity—without relying solely on market appreciation. A cycle of improvement, refinancing and reinvesting Here’s how sweat equity can help you to build a portfolio:
However, that doesn’t mean your efforts have no financial impact. They’re realised when:
Landlords with multiple properties must manage LTVs across their portfolio though to maintain access to refinancing and expansion opportunities. Many lenders impose stricter conditions or caps on high-LTV loans, especially in volatile markets or for portfolio landlords, and this will affect borrowing capacity. Tax implications Of course, anyone who owns, buys, or sells property in the UK faces a range of tax obligations. From Stamp Duty Land Tax that’s paid when purchasing property or land in England and Northern Ireland, to Capital Gains Tax charged on the profit made from selling a property. To the Income Tax on rental profits, the Inheritance Tax on the estate if and when someone dies, and the council tax paid to maintain and fund local services.
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The property is sold, and the gain is captured as profit or capital appreciation.
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The property is revalued, improving your loan-to-value position and borrowing potential.
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The improved property generates higher rental income.
But while the concept feels intuitive, the financial and tax implications aren’t always quite as straightforward.
Key considerations
Rental stress tests These are a crucial factor for landlords because they directly influence mortgage affordability and borrowing capacity. Most buy-to-let lenders will use them to make sure rental income can comfortably cover mortgage repayments—even if interest rates rise. Failing the test can mean reduced borrowing limits or outright rejection. Stress tests also help landlords avoid over- leveraging by making sure their property investments remain viable under adverse conditions, such as rate hikes or rental voids. And for landlords looking to expand, passing stress tests across multiple properties is essential to securing additional financing and maintaining a healthy debt-to-income balance. Stress testing aligns with Prudential Regulation Authority (PRA) guidelines too, which, especially for portfolio landlords, helps to ensure long-term sustainability and regulatory approval. Loan-to-value (LTV) ratios A key factor for landlords to determine how much equity is required in a property - LTV ratios influence borrowing costs, risk exposure, and investment flexibility. A lower LTV means more equity in the property, reducing the risk of negative equity if property values fall and offering greater financial stability. Lower LTV ratios (e.g. 60–70%) also often unlock better mortgage rates and terms, making property investments more cost- effective.
All need to be considered when building a portfolio.
Making sweat count But sweat equity is a powerful strategy for those willing to put in the work. It’s true value lies in the long-term wealth it creates. With well-planned improvements generating capital growth, increasing rental yield, and providing leverage for future investments. And while it’s easy to focus on the physical results — new kitchens, extended leases, or converted lofts — the paperwork and financial structure behind them are just as important. Keeping good records and seeking professional advice can make the difference between simply working hard and truly building wealth. Because with careful planning and the right financial advice, even modest beginnings can lead to significant long-term wealth. We’re here to help If you’re a landlord or individual looking to increase your property portfolio get in contact with Ben or one of the team today by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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Buy below market value
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Add value through renovation
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Revalue and release equity
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Use released equity to fund the next purchase
Leveraging buy-to-let properties Buy-to-let (BTL) properties can also play a key role in this strategy. Borrowing against them can work by:
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Rental income covering mortgage payments
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Using interest only mortgages
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Accessing portfolio landlord lending
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Utilising equity release from buy-to-lets
How is sweat equity reflected in accounts? From an accounting point of view, personal effort doesn’t appear on your balance sheet. You can’t capitalise your own labour costs and neither do you need to, only the expenses you’ve actually paid for, such as materials or professional fees will show.
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Will the Autumn Budget Deliver a Lifeline for the UK Housing Market?
As the UK housing market continues to stall under the weight of high interest rates and affordability pressures, all eyes will be on the upcoming Autumn Budget on 26 November.
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W ith developers slowing pressure to deliver meaningful reform. A lofty target of 1.5 million new homes The Labour government pledged to deliver 1.5 million net additional dwellings in England by the end of this Parliament, expected no later than August 2029. The ambition is central to their “Plan for Change” and is backed by reforms to the planning system, including: construction projects and first-time buyers struggling to enter the market, the government faces mounting
Support for first-time buyers The government currently has few active schemes to support first-time buyers:
Green Incentives and Buyer Support Could the Government look at new schemes for energy-efficient homes? Or will there be a renewed focus on support for first-time buyers? Details remain vague on this topic so far.
There’s the First Homes Scheme: with a 30–50% discount on new builds.
A market in need of clarity and action The housing market is at a crossroads.
And Shared Ownership and Lifetime ISAs still remain available.
And without bold intervention, the government risks not only missing its housing targets but further deepening the affordability crisis too.
But with the reduction of the Stamp Duty Relief Exemption to £300,000 earlier this year this isn’t enough to counteract current high deposit requirements and mortgage costs. What might the Autumn Budget bring? Speculation is rife. But some of the key proposals being floated that would affect the housing market include: Stamp Duty Reform There’s been talk of replacing SDLT with an annual property tax on homes over £500,000. Whilst this could simplify initial transactions it would increase long-term costs for buyers. Capital Gains Tax (CGT) Changes Following the changes made in the 2024 Budget could there be more here from the Chancellor? Potentially aligning CGT with income tax bands? Or reducing exemptions for primary residences? This comes with the risk of discouraging property sales and reducing market liquidity though. National Insurance on Rental Income NI was a huge talking point at the last Budget, with the increases to employer contributions. But could there be an alternative angle, with rental income possibly becoming subject to NI contributions? Estimated to raise £2 billion a year, this would have a significant impact, but there’s a strong risk that it could also drive landlords out of the market.
What we need is an Autumn Budget that capitalises on a critical opportunity to:
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Reignite developer confidence
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Mandatory housing targets for councils
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Support first-time buyers
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A review of green belt land to identify “grey belt” areas suitable for development
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Reform outdated tax structures
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A push for 50% affordable housing on released land
Whether the Chancellor delivers a true lifeline - or merely more uncertainty - is as yet unknown, but what we do know is that it will shape the future of UK housing for years to come. We’re here to help For personal advice on any of the topics above, speak to one of the team by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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A default “yes” to brownfield development
However, progress is already off track. Between July 2024 and June 2025, only 186,600 homes were added—just 12% of the total target. At this pace, it would take over six years to meet the pledge, taking us well beyond the current parliamentary term.
So, something needs to change to make this happen.
An affordability crisis and developer retrenchment
Developers are pulling back. Planning approvals are at record lows and build costs have surged.
In fact, Shawbrook’s 2025 Developer Survey found that 99% of developers have altered their strategies due to affordability concerns. With many delaying projects or shifting focus away from traditional housing. And with the Bank of England base rate holding at 4%, and only modest reductions expected through 2026, mortgage costs remain high. This has created a bottleneck: buyers can’t afford to move, and developers won’t build without demand.
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Making Tax Digital: A Quick Guide for the Construction Industry
The government’s Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) is coming - and if you’re a self-employed builder, electrician, plumber, or any other sole trader within the construction sector, it’s time to get prepared. After successfully rolling out MTD for VAT in 2019, HMRC is now moving forward with digital reporting for income tax. This means you’ll need to keep digital records and submit income updates quarterly—not just once a year.
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Who will be affected?
What will change for you?
You’ll be affected by MTD for ITSA if:
Instead of submitting one tax return a year, you’ll need to:
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You’re registered for Self-Assessment
• Submit quarterly updates of income and expenses to HMRC
• You earn income from self-employment (e.g. construction work, subcontracting)
• Keep digital records of your business transactions with compatible software
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You earn rental income as a landlord
• File a final digital tax return at year-end (similar to the current Self- Assessment)
Your gross income (before expenses) is over:
If you have just one trade, you’ll submit 4 updates per year. If you also have rental income, you’ll need to submit 8 updates (4 for each source).
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£50,000 in 2024/25
Quarterly deadlines
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£30,000 in 2025/26
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£20,000 in 2026/27
Quarter
Period Covered
Filing Deadline
Example: If your total turnover from self-employment as a builder in 2024/25 is £52,000, you’ll need to comply with MTD from April 2026.
Q1
Apr–Jun
7 August
Q2
Jul–Sep
7 November
What counts as qualifying income?
Q3
Oct–Dec
7 February
Q4
Jan–Mar
7 May
For sole traders in the construction and property sector, qualifying income includes:
What if you don’t comply?
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Turnover from self-employment (before expenses)
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Rental income, if you also let out property
MTD is mandatory, and failing to comply could result in penalties from HMRC. It’s important to get ahead of the changes now so you’re not caught out later.
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Certain types of trust or investment income
How to get prepared?
If you have multiple income sources (e.g. building work + rental property), they’re added together to assess if you meet the threshold.
You can start preparing now by:
When will you need to start?
• Switching to digital record keeping (if you haven’t already)
Tax Year Assessed
Income Threshold
MTD Start Date First MTD Tax Year
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Exploring software options that suit your business
• Checking if your current system is HMRC-approved
2024/25
£50,000
6 April 2026
2026/27
2025/26
£30,000
6 April 2027
2027/28
To find out more about the changes read our MTD Commonly Asked Questions here or for more detailed advice to support your transition contact one of the team on 0330 058 6559 or email hello@scruttonbland.co.uk
2026/27
£20,000
6 April 2028
2028/29
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What FRS102 Lease Accounting Changes Mean For The Property and Construction Sector
In March 2024, the Financial Reporting Council (FRC) concluded its second periodic review of the Financial Reporting Standards (FRS 102) and issued a number of amendments.
T he changes, that bring FRS 102 closer to international accounting standards, will apply to financial periods beginning on or after 1 January 2026 and include the introduction of a new lease accounting model. The impact of this change in particular could be significant for many businesses within the property and construction sector, as well as landlords – so an understanding of the implications is key.
The shift in lease accounting Currently, FRS 102 requires leases to be
The property and construction sector will feel these changes in several ways:
classified as either a finance lease (on balance sheet) or an operating lease (off balance sheet).
Balance sheets will expand . Most leases will now appear as assets and liabilities, increasing gearing ratios and potentially altering the perception of financial strength. Profit recognition will shift . Lease costs will be replaced by depreciation and interest charges, changing profit profiles across reporting periods. Cash flow and covenants may be affected . With higher reported debt levels and changes to profit measures, businesses may need to revisit loan covenants and distribution policies. Data collection will be more complex . Businesses will need detailed lease information, such as renewal terms, discount rates and fair values, to support the new calculations.
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Under the revised standard, this distinction is removed though. Instead, most leases will now be recognised on the balance sheet as a ‘right- of-use’ asset and a corresponding lease liability. This approach mirrors IFRS 16: Leases and is designed to improve transparency in financial reporting. However, it also means that many businesses – particularly those leasing property, vehicles or equipment – will see significant changes to their reported assets, liabilities and profits.
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The landlord perspective For landlords, accounting treatment under FRS 102 will remain largely unchanged, with most leases continuing to be treated as operating leases. However, where a lease qualifies as a finance lease, the revised recognition and measurement rules will apply. Landlords should also be aware that their tenants may also need more information under the new model, such as unguaranteed residual values and fair value data, to support their own accounting. This could increase administrative and data-sharing requirements between landlords and lessees.
Preparing for 2026 January 2026 is not far away, so key things to consider now include:
These changes to lease accounting under FRS 102 represent a fundamental shift in how businesses in the property and construction sector report their financial position. Understanding the impact now will help ensure a smooth transition and avoid unexpected issues later. For further information on how we can support you through these changes, get in contact with one of the team by calling 0330 058 6559 or by emailing hello@scruttonbland.co.uk
Finance team readiness : making sure that your teams understand both the accounting and disclosure requirements of the revised FRS 102. Systems and data : reviewing whether your existing accounting systems can capture and report the necessary lease data and whether the chart of accounts needs to be updated. Covenants and tax : modelling how the changes will affect net debt, profits and tax payments, and discussing these with lenders and stakeholders early. Wider business implications : considering any impact on remuneration policies, performance-related pay or corporate transactions where financial metrics are a factor.
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Meet the Team Our team of property and construction specialists regularly advise a wide range of corporate and owner managed businesses, from large civil engineering contractors to specialist craftspeople and have a thorough understanding of the opportunities and challenges facing the industry.
We seek to build long-term, trusted relationships with our clients. It is important to us that we understand our clients’ business and personal aims and objectives, so that we can provide bespoke and personal advice.
Get in touch with a member of the team to see how they can help you.
Ben Cussons Business Advisory Partner ben.cussons@ scruttonbland.co.uk 01379 773532
Steven Burgess Audit Partner steven.burgess@ scruttonbland.co.uk 01473 945870
Tyler Hursey Senior Tax Adviser tyler.hursey@ scruttonbland.co.uk 01206 417272
Jason Fayers Managing Partner and Tax Partner jason.fayers@ scruttonbland.co.uk 01473 945817
Sam Stent Tax Advisory Partner samantha.stent@ scruttonbland.co.uk 01206 417280
Paula Mason VAT Manager paula.mason@ scruttonbland.co.uk 01473 945823
Mark Smith Corporate Finance Director mark.smith@ scruttonbland.co.uk 01473 945732
Chris George Tax Advisory Partner chris.george@ scruttonbland.co.uk 01473 945836
In 2024, Scrutton Bland became part of Sumer – a collaboration of the best regional accountancy practices with a shared vision to champion local small to medium-sized enterprises. By bringing together the best in business services, Sumer retains the value that community-based practices offer and combines this with the scale, breadth of expertise and technologies that only a national organisation can muster.
To find out more about Sumer, visit our website: www.sumer.co.uk
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