Here are the big takeaways buyers, sellers and landlords need to know 👇
💡Budget boost for properties over £500,000: data shows 210,000 homes for sale over £500,000 will avoid a new annual property tax, which is great news for their owners and likely to reboot activity after months of ‘wait and see’.
💡New ‘mansion tax’ in the form of a Council Tax High Value Supplement for homes over £2m. We estimate this to cover 0.5% of UK homes, with 85% in London and the South East.
💡No change on stamp duty means many buyers in lower value housing markets will continue to only pay modest amounts of stamp duty. However, the price bands for stamp duty were set a decade ago and average home buyers are paying more over time.
💡Tax rates for property income will increase by 2%, piling further pressure on landlords and the rental sector.
In her second Budget since Labour came into power, Rachael Reeves unveiled a raft of tax rises, but many rumoured property tax changes have not come to fruition.
It comes after several months of intense speculation about what Reeves might have in store for the property market, which has caused hesitation and slowed activity across the country.
Needless to say, and as we alluded to yesterday, the greatest impact has come from the uncertainty in the lead-up to the Budget - rather than the Budget itself. With the announcement today, buyers and sellers can feel encouraged to re-enter the market.
- No new annual tax on homes over £500,000
The housing market stalled in recent weeks on fears of a new annual proportional property tax for those buying homes over £500,000 on top of the council tax. This is not happening although there will be a tax on high value homes over £2m collected via reforms to the council tax system.
The threat of an extra tax for buyers of homes over £500,000 will be a huge relief for the owners of the 210,000 homes for sale over this price level. We expect this to renew buyer interest as we head into 2026.
- New property tax on the highest value homes
As widely trailed, the Government is going to charge a Council Tax High Value Supplement on homes worth £2m or more in England. This will hit around 0.5% of homes and homeowners. This will not affect too many people in Gloucestershire as 85% of these properties are in the highest value areas of London and the South East.
The Chancellor reported an annual additional cost of around £2,500 a year for homes worth £2m, rising to £7,500 a year for homes over £5m. For a £2m home, this is less than double the average council tax today and is less than many feared.
How much this creates a cliff edge around the £2m price band remains to be seen and the impact will depend on how this new scheme is rolled out.
- Rise to property income tax rates for landlords
Reeves has announced that landlords will face increased property tax rates from April 2027. The basic, higher and additional rates of income tax for property income will each increase by 2%, taking them to 22%, 42% and 47% respectively.
The move is likely to unsettle landlords, who already face tighter regulations from the recent Renters’ Rights Act, as well as new energy efficiency regulations and higher stamp duty on the purchase of additional homes (from 3% to 5%) in last year’s Budget.
- No changes to stamp duty rates or thresholds
While the threat of wider tax changes impacting the mainstream housing market has been removed, stamp duty remains a significant hurdle for home buyers, especially in southern England.
The stamp duty price thresholds for existing home owners were set in 2014, while house prices are 47% higher over this time. This is creating ‘fiscal drag’ for home buyers in the housing market with buyers of average priced homes paying more.
Since 2019, the number of homes bought by existing homeowners where the cost of stamp duty is more than 2.5% of the purchase price has jumped from 21% to 33%.
- Lack of major changes supports market stability
For the majority of the market, there’s a sense of relief that all the Budget speculation is behind us. The lack of significant change will deliver the stability the market needs, removing uncertainty for buyers and sellers across the mainstream market.
The hope is for the Bank of England to cut the base rate of interest when they next meet on 18th December and if that were to happen then it suggests the property market is likely to see an uplift in activity at the start of 2026.
If you are considering selling and have any questions about what is best for you, then please get in touch and we will be delighted to have a chat and make a plan to get you moved.
We welcome your thoughts and comments and are happy to answer any questions you have on this or any other property related matter so please feel free to get in touch.
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