Despite months of kite-flying, Rachel Reeves made no mention of the creation of an annual property tax or the abolition of stamp duty in her Autumn Budget, but hundreds of thousands of London homeowners will be wondering what her plans for a new High Value Council Tax Surcharge mean for them.
The late-scheduled Budget, coming a month later than last year, has been blamed for creating uncertainty and leaving would-be buyers and sellers in wait-and-see limbo in an already stagnant housing market.
Here are the property announcements in today’s Budget:
Mansion tax
Ms Reeves announced the introduction of a new high-value council tax surcharge on properties worth over £2 million, commonly dubbed the ‘mansion tax’.
From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge collected alongside and on top of their council tax.
There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more, uprated by CPI inflation each year. There will be consultation to allow cash-poor homeowners to defer payment — likely until a home move or death.
Ms Reeves said the new tax will apply to less than the top one per cent of properties.
Savills has estimated that there are 145,000 homes in the UK currently valued at £2 million or more.
The tax will have a disproportionate impact on homeowners in London and the South East of England. Sixty-eight per cent of £2 million-plus sales in England are in Greater London with the highest proportion in Kensington and Chelsea, followed by Westminster then Camden giving an indication of where the clusters of multi-million-pound homes are in the capital, according to data from JLL.
Eight of the top 10 local authorities in the country by the highest number of £2 million-plus sales were London boroughs, and the outlying two in the Home Counties (Elmbridge and St Albans).
Tax on property income
Rates of income tax from property income will increase by two percentage points from April 2027.
“A landlord with an income of £25,000 will pay nearly £1,200 pounds less in tax than their tenants with the same salary, because no national insurance is charged on property, dividend or savings income,” said Ms Reeves.
From April the basic, higher and additional rates of property tax will increase to 22, 42 and 47 per cent respectively.
Industry voices warn that the changes could result in higher rents or few rental properties available to tenants.
“Hitting landlords with National Insurance will further shrink the availability of rental property, particularly in London where the buy to let model for many landlords relies on mortgage funding and so there is no headroom for this extra cost in the investment,” said Dominic Agace, chief executive of Winkworth estate agents.
“If we have fewer rental properties, there will be a poorer quality of life for people forced to live at home for longer, or live in a flat with more sharers.”
