Chancellor Rachel Reeves’ Autumn Budget included a series of property-related tax measures that will reshape the UK real estate landscape.
While the government avoided introducing National Insurance on rental income, a widely feared move, the Budget still brings significant changes for landlords, homeowners, and investors.
Key Tax Changes Announced
1. High-Value Property Levy (“Mansion Tax”)
From April 2028, properties valued at £2 million or more will face a new annual council tax surcharge, often dubbed the ‘mansion tax’.
Bands and Charges:
£2m-£2.5m: £2,500
£2.5m-£5m: £5,000
£5m+ : £7,500The surcharge will be uprated annually by CPI and collected alongside council tax.
A deferral mechanism for asset-rich, cash-poor homeowners is under consultation.
2. Property Income Tax Increases
The Budget confirms that, from April 2027, there will be a 2% increase in the basic, higher, and additional rates of property income tax. The new rates will be 22%, 42%, and 47% respectively. The Chancellor justified this by pointing out that landlords currently pay no National Insurance on rental income, creating a disparity with earned income.
Furthermore, regional mayors will gain powers to introduce an overnight visitor levy, like schemes planned in Wales (£1.30 per night) and Scotland (5% of accommodation cost). A consultation will follow on how the levy should be designed.
3. Principal private residence relief
Despite speculation in the run-up to the Budget, no measures were announced to remove the main residence exemption, meaning that the sale of a main home will, at least for the time being, escape CGT.
4. Stamp Duty Land Tax (SDLT)
No major reform to Stamp Duty Land Tax was announced, despite speculation.
5. Businesses
Whilst there will be no change to the rates of corporation tax, a series of capital allowance measures were announced:
- The introduction of a new 40% First-Year Allowance (FYA) for most qualifying main rate assets from 1 January 2026 (available to both companies and unincorporated businesses)
- A reduction in the rate of main pool Writing Down Allowances (WDA) from 18% to 14% starting from April 2026
Income tax and national insurance thresholds will remain frozen until 2030-31.
From April 2029, salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs. These contributions will become subject to both employer and employee NICs.
New National Minimum Wage increases will apply from April 2026:
- Over-21s: £12.71 per hour
- Ages 18–20: £10.85 per hour
- Under-18s and apprentices: £8 per hour
6. Business Rates
The Budget announced the introduction of lower rates for more than 750,000 retail, hospitality and leisure (RHL) properties, albeit this will be paid for by higher business rates on properties worth more than £500,000.
The RHL multipliers will be 5p below their national equivalents, making the small business RHL multiplier 38.2p and the standard RHL multiplier 43p in 2026-27.
For retailers and other businesses seeing an increase in business rates, the government will provide:
A £3.2 billion Transitional Relief scheme providing support to the largest ratepayers, including airports and hospitality
A “Supporting Small Business” scheme to help the smallest businesses
Expanding the Supporting Small Business scheme for companies that were eligible for RHL relief, which the government says “protects independent pubs and shops as they transition to lower tax rates permanently”
7. Anti-avoidance and other measure
The penalty for taxpayers submitting a Corporation Tax return late will double from 1 April 2026. Late submission penalties will not apply for quarterly updates during the 2026-27 tax year for Income Tax Self Assessment (ITSA) taxpayers required to join Making Tax Digital (MTD). The government will apply the new penalty system for late submission and late payment to all ITSA taxpayers not already due to join the new system from 6 April 2027 (penalties due for late payment of ITSA and VAT will increase from 1 April 2027).
New measures will be introduced to tighten the Construction Industry Scheme (CIS), including stronger checks around gross payment status and scheme abuse.
Additional anti-avoidance measures will be introduced, including additional investment into the Insolvency Service staff to disqualify more rogue directors and the extension of the Company Directors Disqualification Act 1986.
A new ‘whistleblower’ scheme will provide financial rewards to individuals who provide information in high-value fraud cases.
There will also be a renewed focus on non-compliance on the high street, including targeted action against illegal mini-marts, barbershops, vape shops, nail bars and car washes.
Our view
Tom Roseff, Tax Partner, comments: “The Chancellor’s approach reflects a clear shift toward taxing wealth and passive income rather than earned income. However, whilst the mansion tax and additional income tax hit on property returns aim to address perceived inequities, they risk distorting market behaviour. It seems likely that high-value homeowners may accelerate disposals ahead of 2028, and landlords already under pressure from compliance and interest costs may well simply exit the market, reducing rental supply and driving up rents.”
Zoe Roberts, Tax Partner, adds: “These changes represent further pain for private landlords, coming on the back of changes to the relief available for mortgage interest relief, the stamp duty land tax surcharge, the reduction in capital gains tax allowances and the introduction of the Renters’ Rights Act. For many landlords, this will represent a significant further slice of what are, in many cases, already slim returns being taken by the taxman. We expect that, for many private landlords, this may become the ‘final straw’, and we may well now see a long-term reduction in the supply of rental property. The fear for many tenants will be that a reduction in supply risks a steady, long-term rise in rents if demand outstrips supply.
Strategically, property investors should review their structures now. Incorporation, timing of disposals, and exploring reliefs will continue to be critical. For developers, the absence of major SDLT reform is a missed opportunity to unlock mobility and stimulate transactions. Overall, these changes underscore the need for proactive tax planning in an increasingly complex landscape.”
Join our experts on Thursday, 4 December 2025, for our Budget Seminar and discover what the Budget could mean for you and your business.
