Budget 2026 confirms golden brick VAT zero rate and 1.5ha brownfield BNG exemption

The government confirmed at the Budget on 28 October a new zero rate of VAT on land sold to registered providers of social housing, taking effect from 1 April 2027, alongside a Biodiversity Net Gain exemption for brownfield sites of up to 1.5 hectares.

The measures were set out in a Home Builders Federation (HBF) member briefing issued on Budget day, which also summarised the Office for Budget Responsibility's (OBR) latest housing forecast. HBF said the OBR noted that the cumulative impact of regulation and policy costs had weighed on home building activity.

HBF said the Chancellor confirmed £4.7bn of funding for the Your First Home equity-loan scheme. The Ministry of Housing, Communities and Local Government had first announced the scheme on 26 September, saying it would be confirmed at the Budget.

Neil Jefferson, chief executive of the Home Builders Federation, said: "We welcome the Your First Home scheme to support first-time buyers of new-build homes." He added that "a lack of effective demand has been one of the major barriers to increasing housing supply".

Golden brick

In its summary of responses to the consultation on the VAT treatment of land for social housing, HM Treasury and HM Revenue & Customs said the government had decided to proceed with a new zero rate of VAT for land sold to registered providers of social housing. Secondary legislation will be laid in early 2027.

The government response said "golden brick" structures delay the transfer of ownership until the supply can be zero rated under a different VAT relief. HBF said the intended effect of the change is to let a housing association acquire land before the golden brick stage, supporting earlier title transfer and reducing reliance on staged transactions.

The consultation ran from 23 June to 18 August 2026 and, according to the government's summary, received 97 responses. HMRC will consider consolidated guidance addressing common delivery models.

Biodiversity net gain and remediation

HBF said the 1.5ha brownfield BNG exemption is lower than the 2.5ha maximum floated in the consultation earlier this year. The full government response, impact assessment and implementation timeline are to follow, HBF said. BNG becomes mandatory for Nationally Significant Infrastructure Projects from November 2026.

The government will not make Land Remediation Relief more generous, citing cost, according to HBF's briefing, although HMRC will review its guidance on the relief. The government also said it would make no major changes to Building Regulations for the rest of this Parliament, other than to continue improving building safety, including implementing the Grenfell Inquiry recommendations.

Affordable housing and buyers

A further £1.5bn is going into the Social and Affordable Homes Programme, which the Treasury said takes total investment to more than £40bn over 10 years and will deliver around 10,000 homes in England. HBF said the funding is prioritised for Social Rent and council homes.

The preferential Public Works Loan Board rate for council housebuilding is extended for a further year to 2027/28, at 40 basis points below the normal rate. HBF's briefing also put total additional rough sleeping funding at £874m from 2026/27 to 2028/29.

A new First-Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029, offering a 25% government bonus on a first home worth up to £450,000, with the bonus capped at £20,000. All rates of income tax on property income rise by two percentage points, and the government will require at least 3% of the workforce on large government construction and infrastructure projects to be apprentices.

OBR forecast

HBF summarised the OBR as expecting net additions to the housing stock to fall from about 230,000 in 2025/26 to 220,000 in each of 2026/27 and 2027/28. Compared with its March forecast, the OBR expects 190,000 fewer cumulative net additions over the forecast period.

Year	Net additions (OBR, per HBF)
2025/26	230,000
2026/27	220,000
2027/28	220,000

The OBR expects average house prices to grow by around 2% in 2026 and 2.5% in 2027, according to HBF.

HBF is holding a members-only Budget webinar on Thursday 29 October from 1pm to 2.30pm, with Homes England speaking on preparations for the launch of Your First Home.