The Autumn Budget 2025, announced today by Chancellor Rachel Reeves, has finally clarified several rumoured tax changes to the property market – namely, to council tax, income tax and stamp duty land tax (SDLT). Key changes and potential knock-on effects are outlined below.
New “Mansion Tax”
Reeves announced the introduction of a new annual council tax surcharge (AKA ‘mansion tax’) on residential properties valued at £2 million or more by the Valuation Office from April 2028. This may have a disproportionate impact on London and the South East.
The surcharge will be tiered as follows:
- £2,500 per year for properties worth between £2 and 2.5 million (lowest band)
- £3,500 per year for properties worth between £2.5 and 3.5 million
- £5,000 per year for properties worth between £3.5 and 5 million; and
- £7,500 per year for homes worth £5 million or more (highest band).
This charge is to be paid by the registered owner of the property, not necessarily by the occupier – meaning that the landlord, not the tenant, under an assured shorthold or periodic tenancy would pay the charge on a qualifying property.
Owners of high-value homes will now have to meet this recurring annual tax in addition to the traditional one-off purchase costs such as Stamp Duty Land Tax.
They and their buyers may fear that the rates may be increased in future and that fiscal drag may magnify the effect of this surcharge over time.
This will especially affect those who are asset-rich but cash-poor.
Buyers may become hesitate to acquire such properties and so this may suppress demand in this segment of the market.
Increase in Property Income Tax for Landlords and Investors
Income made on property (e.g. rental income) will be taxed at higher rates, with each income tax band set to rise by 2 percentage points across the board from April 2027 as follows:
- Basic: from 20% to 22%
- Additional: from 40% to 42%
- Higher: from 45% to 47%
The intention is to bring property income in line with other income sources, which increases the tax burden on buy-to-let investments.
As a result, landlords will see tighter profit margins. For those using higher leverage, this may make property investment less attractive or financially viable. Some may even consider exiting the market altogether. There could also be a reduction in the supply of residential rental properties available for let over time and an upward effect on rents.
No Changes to Stamp Duty Land Tax
Contrary to the widespread speculation in the run-up to the Budget, the government has not scrapped (or even changed) SDLT regime: it stands untouched by the Budget. First-time buyers especially may be disappointed by this.
What Now?
The Autumn Budget represents a material shift in the way residential property is taxed.
Landlords in particular will be affected. From April 2027, most landlords will face higher tax on income from rented properties; from April 2028 onwards, landlords of higher value properties further impacted by the introduction of mansion tax.
Together these reforms may significantly alter the attractiveness of property as a long-term investment.
For some landlords, this may prompt an exit from the industry altogether. Tenants might expect increased rents if there is a reduction in the number of properties available to let.
Owners of higher value homes will also feel the impact of the new mansion tax regime, which might cause an increase of higher value homes on the market and a reduction in demand for them.
For now, it remains to be seen what the full impact of these announcements will be over the coming years, as landlords, tenants and high-value property owners prepare for the first of the changes to be implemented in 2027.
Mark Vinall, Partner, Ashley Wilson Solicitors LLP