A year on from the first budget delivered by Rachel Reeves, the consensus seemed to be that ‘difficult times ahead’ would continue as the UK looked to ease economic difficulty. For the housing market, rumours of several new property taxes effectively stalled the market, causing hesitation amongst both buyers and sellers.
Fortunately, the rumours seemed to have more impact than the actual Budget itself, which has little to say around Shared Ownership, first-time buyers and those not purchasing high-net worth properties. Below we breakdown the property-related aspects of the 2025 Autumn Budget and what homeowners can expect going forward.
Mansion tax introduced on homes worth more than £2 million
One of two main property taxes introduced was the so-called ‘mansion tax’, which is an annual surcharge paid on homes worth over £2 million. This is a tax paid by the owner of the property, rather than the occupier and is proportional to the value, as indicated below:
£2,000,000 - £2,500,000: £2,500
£2,500,000 - £3,500,000: £3,500
£3,500,000 - £5,000,000: £5,000
Over £5,000,000: £7,500
According to Rightmove, less than 0.5% of all homes sold this year have an asking price of £2 million and due to the nature of the market, this tax will largely affect homeowners in London and the South East, where the number of properties worth this much are higher.
It’s expected that the mansion tax will come into force in April 2028.
Rumoured annual tax on homes over £500,000 doesn’t appear
While the mansion tax is going forward in three years, many in the housing market had fears around a proportional property tax on homes worth over £500,000, which naturally lead to a slower market around this price bracket.
For those buying around this price bracket, around 24% of the UK according to Zoopla, this will come as a huge relief and likely result in renewed interest in homebuying around London and the South East where more properties are valued around this price.
Income tax rises on rental income for landlords
As of 2027, landlords can expect to see their income tax on rental income rise by 2%.
While initial rumours suggested that landlords might pay national insurance on their rental income, the Government has instead chosen to increase the income tax rates as of April 2027.
In practice, this means that landlords will now pay the following:
Basic: 22%
Higher: 42%
Additional: 47%
Naturally, this will reduce in smaller returns for landlords that choose to rent their homes out and mean one of two things:
Landlords will offset the additional costs by increasing their rents
Landlords will exit the market entirely, particularly if they're already drawing a lower rental yield or have smaller property portfolios
That said, with the rental market already increasing at a rapid rate, and many landlords experiencing some of the best rental yields seen in the last decade, many landlords may choose to simply take the higher rates and we’ll see a natural correction in a market that has experienced heavy growth over the last ten years.
What does the Budget mean for homebuyers?
So the important question, what does this mean for you? If you’re a first-time buyer or you’re looking to move into a home worth under £2 million, the honest answer is not much.
If anything, the sense of certainty that comes with knowing exactly what is being laid out will benefit the market, ensuring buyers that had a sense of hesitation can now move forward with a purchase.
Also, with no real changes being made to Stamp Duty, again despite rumours, it seems it’ll be business as usual heading into the new year.
Ultimately, the good news for homebuyers is that Labour seems to be pushing for more homes and, in particular, more affordable housing. Increased supply means more transactions and revenue, which in turn means higher growth and significantly more opportunities for us all to buy our dream home.
If you want to know more about the homes we have available to buy through affordable home ownership schemes, you can do so here.
