BUDGET: Chancellor brings in mansion tax and higher landlord income tax
The 2025 Autumn Budget unveiled by the Chancellor will mean high-value homeowners and many landlords will end up paying more tax.
From April 2027, property-related income will face higher tax rates: 22% (basic), 42% (higher), and 47% (additional).
More landlords and buy-to-Let owners under pressure
The increased tax on property income comes after recent reforms that already reduced tax relief on mortgage interest for buy-to-let properties.
The response from the property industry has been negative. According to Rightmove, the new tax could distort demand in the prime market — especially for homes near the £2 million threshold, where sellers may be incentivised to price just below that mark to avoid the surcharge.
This tax will raise around £500million a year according to an accidentally-published document from the Office for Budget Responsibility this morning.
Hamptons head of research Aneisha Beveridge was quoted as saying: “Those operating through limited companies will remain unaffected, but for individual landlords who make up the bulk of the market and who are already squeezed by higher borrowing costs and previous tax changes, this could accelerate the trend of investors exiting the market."
New “Super Council Tax” for £2M+ homes
As part of the Budget, a new annual surcharge — dubbed the “mansion tax” — will apply from April 2028 to residential properties valued at over £2 million. This levy is intended to be an addition to the regular council tax and will be indexed to CPI inflation from 2029–30 onwards.
Estimates suggest the measure could raise roughly £400 million annually for the government.
Potential Market Impact: Shift in Buyer Behaviour
Lots of landlords will be pretty cheesed off that they have to pay more tax, but they have been expecting this for a while. This tax may well mean even more previously rented out properties are put on the market, which in turn pushes up rents in many areas even more. Buy-to-let mortgage rates have fallen significantly over the last year, and there are many high-fee and low fixed-rate options. With more people paying higher taxes, cheaper mortgage rates will be even more important, so we can expect a base rate cut in December. First-time buyers will still be keen to get on the property ladder.
What else did the Chancellor announce?
- Income tax thresholds will be frozen until April 2031 meaning more people will pay higher rates as their pay increases.
- The two-child cap on means-tested benefits will be lifted.
- The government's tax take is likely to reach an all-time high of 38% of GDP in 2030-31.
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