The wait for the Budget seems like an eternity – in a sense, it’s ‘early’! The OBR report is usually released a few hours after the Budget but was unexpectedly released 35 minutes earlier.
Anyone watching the BBC Budget foreword will have seen Chris Mason and Faisal Islam frantically grabbing for their phones, trying to view the contents of the more than 400 pages of the OBR report (and supporting documents). “This is unprecedented” seems to be repeated over and over again.
Exact timing, apart from the main elements of the Budget’s so-called mansion tax and new landlord tax.
mansion tax
Owners of properties worth more than £2 million will be hit by a new “mansion tax” that will net the government £400 million a year, the chancellor has revealed.
From April 2028, the tax will be levied as a council tax surcharge on homes whose value exceeds a threshold determined by the Valuation Office based on 2026 prices. Unlike standard council tax, the revenue from this additional charge will go to central government.
Industry reaction has been mixed. Lucian Cook, head of residential research at Savills, said the annual surcharge on properties worth more than £2 million, at a lower level than many had feared, could be the worst outcome for owners of prime properties.
“With the uncertainty surrounding the budget already affecting prices, the impact on the market will be far less than the impact of an open mansion tax. “However unpopular any tax increase may be, the certainty it provides will enable buyers and sellers to make plans that have been put on hold in recent months.
MPowered mortgage director Peter Stimson was more scathing. “The ‘mansion tax’ is red meat for Labour’s red wall, but it is an indiscriminate tax on large swaths of London.” Average house prices in London fell by 1.8% in the year to September. That decline may now turn into a decline as buyers avoid homes in the gray area priced below £2m. “While we are still awaiting details on how exactly the government will assess the thousands of homes on the front line, this measure raises the strange specter of homeowners trying to reduce curb appeal and slash value.”
He added: “All this disruption to just £400 million in tax revenue seems like a very poor return. Rather than overhauling the crumbling stamp duty or council tax systems, the mansion tax feels like political posturing disguised as policy.”
Stonebridge chief executive Rob Clifford was equally scathing: “This feels like a short-term revenue-raising measure designed to fill a fiscal gap rather than a thoughtful reform of an outdated system.
“Few would dispute that owners of more valuable properties should contribute more. The problem is how the government chooses to deal with it. The smarter long-term and fairer solution is to reform the entire system rather than add more complexity.”
He added: “As things stand, this change does little good for anyone. Households buying higher-value homes will pay more, but those buying lower-end homes will receive no relief. It could also lead to market distortions around the £2 million threshold. Ultimately, the UK needs a long-term approach to property tax – one that modernizes the system rather than relying on short-term fixes.”
property income tax
Chancellor Rachel Reeves also revealed that property income tax rates will rise by 2% from April 2027. The basic, higher and surcharge rates of property income tax will rise by 2% to 22%, 42% and 47% respectively.
According to the Office for Budget Responsibility, this will generate around £500 million in additional tax revenue each year.
COHO founder and CEO Vann Vogstad is an outspoken opponent of this rise. “Landlords have become an easy political target. This tax increase, especially combined with the upcoming reforms to the Tenants’ Bill of Rights, will inevitably lead to higher rents. It’s just basic economics.”
Aneisha Beveridge, head of research at Hamptons, said: “Those landlords operating through limited companies will not be affected, but for individual landlords who make up the majority of the market and are already squeezed by rising borrowing costs and previous tax changes, this may accelerate the trend of investors exiting the market.”
“Over time, this could reduce rental supply and push rents higher.”
David Hollingworth, associate director at L&C Mortgages, said the news was another major blow for landlords, who have been increasingly hit by the measures as they make it more difficult to maintain returns on rental properties.
“Limitations on mortgage interest relief, tighter lending requirements and higher interest rates have impacted private landlords.
“This will be another test of their appetite to stay in the market. If they choose to exit, it may free up properties for first-home buyers. However, despite continued demand, there is still the possibility of reducing the supply of rental properties, ultimately pushing rents higher.”
What’s missing?
While major reform of stamp duty is kite-like, this Budget contains no real progress. Maybe this is one for next time?
While some will undoubtedly welcome the chancellor’s decision to resist the re-institution of stamp duty charges, others are disappointed that no changes have been made.
Richard Sexton, commercial director at Houzecheck, said: “Rachel Reeves would have brought benefits to us all by reducing stamp duty rates for first-time buyers and all residential purchases under £500,000. A reduction in transaction tax like this would reduce upfront costs for buyers and stimulate demand, particularly from younger first-time buyers.
He added: “She could have introduced temporary stamp duty relief for properties under £750,000 over the next 12 months. Historically this would have boosted market activity – just look at the impact this had in 2020, when buyers were rushing to complete deals before expiry dates and sellers listed more properties. A cut in stamp duty would show government support for brokers, conveyancers and agents. The new mansion tax shows exactly the opposite.”
No one had any illusions that this would be a giveaway budget. Clearly, the real estate market has been on the government’s radar from the beginning. But at least the market can move forward and deal with what is known so far.
