Tax Planning for Property Developers: Why It’s So Important, and What Options Are There?

Market Financial Solutions is a bespoke lender, and not a financial advisor or accountant. As such, we cannot offer tax planning for property developers, or any other kind of investor. Still, it’s worth familiarising ourselves with the current applicable rules, and what’s on the horizon.

Changes are on the way, and developers are facing shifts that are separate to those that’ll hit property investors or landlords. It’s important to understand the distinction between the two, which can often be lumped together.

Tax is a complicated area but as UK Landlord Tax details[1], there are a few key levy implications that highlight the fine line between the two. Generally, property investors are primarily liable for capital gains tax on the difference between the original cost of a property, plus any enhancement expenditure and the disposal proceeds. There may also be various deductibles available that can help with income tax, and other levies.

But, here is where things can get complicated for property developers specifically. As UK Landlord Tax explains: “A property developer is treated as carrying on a trade and is liable to Income Tax and National Insurance on his/her trading profit. The trading profit would include a deduction for all expenses incurred wholly and exclusively in the course of the trade.

“So unlike the property investor, loan or mortgage interest would normally be an allowable expense in calculating the profit. However, if anyone helps the developer, they are either an employee of the developer so a PAYE/NIC scheme would need to be operated so regular returns would be required and tax may need to be deducted.

“Any losses (provided that there was an intention of profit) can be relieved against other income. If the property development continues over more than one tax year then the income may be spread over those years.”

To reiterate, if property developers want to better understand their tax positions, they should seek expert guidance from accountants and/or financial advisors. But, the need for this kind of guidance is set to ramp up over the coming months.

The pressure is on

Increased scrutiny is being placed on property developers, and the levies they pay to the state. Take the Residential Property Developer Tax (RPDT) which was introduced in 2022. The aim of the tax was to get residential property developers to pay an additional levy to fund the cost of remediating cladding issues which is borne by the government[2].

While it was introduced in 2022, recent updates indicate the government will be focusing on enforcement much more going forward. In early 2025, HMRC published updated guidance on the RPDT, including new rules for reporting liabilities[3]. This is on top of anti-avoidance rules the government put in place once it became clear that some developers sought to take advantage of forestalling loopholes[4].

Also, HMRC has been clear that its guidance on RPDT may evolve as further consultations take place[5] and broadly, there is mounting pressure on developers to get building in the UK[6]. Property developers and the wider public can generally agree that it’s in all our best interests to deliver more stock. But that doesn’t change the fact it’s becoming increasingly costly – both financially and administratively – to build in the UK.

According to Urbanist Architecture, building costs in the UK start from £1,750 per square metre[7]. For 2025, a cost estimation for a house is anywhere between £1,750 and £3,000 per m2, and this doesn’t include a recommended extra 15% to cover external costs such as hiring experts and consultants. Also, a recent survey from the Building Cost Information Service revealed that construction costs are set to rise by 12% by 2030[8].

With costs rising, tax planning for property developers may become essential over the coming years as a way to cut the final bill. There may be limited options available to developers when it comes to building costs, but there could be methods for bringing down a tax bill.

To start with, property developers may be able to cut their tax bill by operating as a company, rather than as an individual[9]. What’s more, many of the tax incentives for developers are distinct from those that are more broadly available to property investors.

Stamp duty

There may be a number of reliefs available to developers to cut their stamp duty bills specifically. For instance, HMRC may offer relief for property developers who are providing amenities to communities[10].

In limited circumstances, developers who acquire dwellings for redevelopment may also be able to cut their stamp duty bills with mixed-use, or derelict property relief[11]. Also, those purchasing land or buildings within designated freeport or investment zones may be able to claim stamp duty relief if they intend to use them for development, or redevelopment for resale[12].

Land remediation relief

Arguably, no tax planning for property developers is complete without consideration of land remediation relief. A particularly generous tax incentive[13], it promotes the cleaning up and redevelopment of contaminated or derelict land. With it, property developers can receive a 50% deduction in tax costs when they invest in cleaning up a contaminated site and building[14].

Brownfield projects

Recently, the government added £2bn to its funding efforts to accelerate brownfield regeneration across key urban zones[15]. Specifically, London, Manchester, and Birmingham are set to benefit from this. For developers, this may allow them to benefit from increased opportunities in land acquisition, fast-tracked approvals, and potential incentives for mixed-use schemes and build-to-rent developments.

Of course, within these examples, we have only touched on tax planning for property developers – let alone those we haven’t even mentioned. Each and every tax incentive for developers will have its own rules that must be followed, as well as qualifying parameters. To truly understand it all, developers will need to work with qualified accountants.

But, if they do find a route that works for them, we will be able to help with the financing side of things. With bridging finance, developer exit funding, and permitted & light development capital at the ready, we’re there for a broad range of property development strategies.