UK Autumn Budget 2025: Key Property Announcements & Impact on the UK Housing Market

After months of speculation that effectively paralysed the property market, Chancellor Rachel Reeves delivered the Autumn Budget on 26 November 2025, bringing much-needed clarity for buyers, sellers, investors, and landlords. The most significant announcement is a new annual levy on homes valued above £2 million—described as the most substantial shift in high-value property taxation in years—yet the Budget also delivered several unexpected reliefs that the market had feared would be far more punitive.

Key Changes Announced in the Budget

1. High Value Council Tax Surcharge (“Mansion Tax”) – From April 2028

A new annual surcharge will apply to properties in England valued at more than £2 million, payable by the owner on top of the existing council tax. The bands are as follows:

The Office for Budget Responsibility (OBR) estimates this measure will raise approximately £400 million per year by 2029–30. Around 153,000 homes are expected to be affected, with roughly 88% located in London and the South East, where family homes in certain neighbourhoods already exceed the threshold. The surcharge will be uprated annually by the Consumer Price Index (CPI), and revaluations will take place every five years. A consultation in 2026 will address support for homeowners and a deferral scheme for those unable to pay immediately—particularly relevant for those who purchased decades ago and have seen values soar.

2. Rental Income Tax Increases – From April 2027

From April 2027, property income will be taxed at separate, higher rates:

The increase applies to property income above the £1,000 property allowance. While this adds further pressure on private landlords, the Government rejected the proposal to apply National Insurance to rental income—a substantial relief for investors who had feared a far more severe outcome. The existing mortgage interest relief will be provided at the new 22% basic rate (up from 20%), though the mechanics of Section 24 mean the real-world impact for higher-rate taxpayers can be significantly amplified.

3. No Changes to Stamp Duty Land Tax

Despite widespread speculation, the Budget contained no changes to Stamp Duty Land Tax (SDLT) for homebuyers. This will be a significant relief for those in the market, as rumours of rate increases or threshold adjustments had contributed to hesitancy, particularly at the upper end of the market.

4. Visitor Levy Powers for Local Authorities

New powers will allow regional mayors and local councils to introduce an overnight visitor levy on hotel stays and short-term lets, including Airbnb-style properties. This continues the trend of policy changes affecting short-term and holiday let landlords, following the abolition of the Furnished Holiday Lettings tax regime from April 2025.

Short-Term Market Reaction

Market turbulence was already evident in the run-up to the Budget:

• Upper-end sales have been significantly affected, with Rightmove data showing sales agreed for £2m+ homes down 13% year-on-year, while homes priced between £500k and £2m are down 8%.

• Asking prices fell by 1.8% in November—the largest fall at this time of year since 2012—with average new seller asking prices at £364,833.

• Price reductions reached a high of 34% of homes on the market, with the average reduction size at 7%.

• Prime Central London has experienced notable correction, with Knight Frank reporting prices down approximately 3.2% year-on-year and revising their 2025 forecast to -4%.

• The OBR expects some downward price pressure in upper-tier segments, and shares in some London-focused developers initially moved lower on the announcement.

Why This May Be Positive for the UK Housing Market

1. Stability and Predictability Return

The so-called “mansion tax” has been discussed for years. Now that policy is confirmed:

• Buyers can plan ahead with a clearer understanding of future holding costs.

• Sellers can price strategically around key thresholds (though this may create bunching effects just below £2m, £2.5m, £3.5m, and £5m).

• Developers and lenders have greater clarity when assessing demand and funding.

Confidence tends to thrive when uncertainty ends—even if the headline changes initially feel challenging. As Rightmove’s property expert noted, “Once the announcements are out of the way, home-movers can focus on planning with more confidence.”

2. The UK Aligns with Global Standards

Many major international markets—including Singapore, Hong Kong, and New York—already apply recurring or layered taxes to higher-value real estate. International investors are familiar with this type of framework and often see it as a sign of a mature, transparent market, particularly when valuations are regularly updated. London’s enduring appeal as a global financial centre and safe haven for capital preservation remains intact.

3. Opportunities Will Accelerate

These changes are likely to create new opportunities for:

• Buyers who have been waiting on the sidelines for clarity.

• Sellers positioned just below key value thresholds.

• Investors focused on long-term value and robust rental demand.

• Developers offering strong incentives and compelling payment plans.

The end of uncertainty typically leads to a period of renewal, repricing, and increased activity. Notably, the OBR forecasts house prices to increase from £260,000 in 2024 to just under £305,000 by 2030, averaging 2.5% annual growth from 2026 onwards.

What About the Rental Market?

Landlords have faced an increasing tax burden over the past decade. The OBR’s assessment is sobering:

“The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns. This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run, risking a steady, long-term rise in rents if demand outstrips supply.”

Some private landlords may choose to reduce or exit their portfolios. In many markets, reduced rental stock leads to:

• Tighter supply of quality rental homes.

• Upward pressure on rents over the medium to long term.

• Potentially stronger rental yields for those who remain invested.

For professional landlords and institutional investors, this environment can strengthen the long-term fundamentals of well-located, well-managed rental property. Prime Central London rental values are forecast to grow by 12.6% between 2025 and 2029, with Outer Prime London at 15.4%.

What Happens Next?

Over the coming months and years, we are likely to see:

• Premium London property values adjust, but the core appeal of the capital remains intact. Long-term forecasts suggest cumulative price growth of 18–21% for prime London properties by 2029.

• Buyers focusing more on value, quality, and developer incentives, particularly as stock levels remain at decade highs.

• More strategic pricing around the £2m threshold and subsequent bands—the OBR notes price bunching is likely as homeowners look to minimise tax liability.

• Continued demand from overseas investors looking for stability and long-term growth.

• A potential housing supply rebound by 2029–30, with the OBR forecasting net additions reaching 305,000 homes per year as planning reforms take effect—the highest level in decades.

The Prime London market has already weathered multiple rounds of tax reform over the past decade. It remains one of the world’s most resilient and desirable real estate hubs.

Key Takeaways

Personal Reflections

Disappointed: After all the noise and speculation, the Government still did not use this opportunity to reform Stamp Duty Land Tax (SDLT).

Surprised: The Mansion Tax has landed, but it is actually less severe than expected.

Relieved: Thank goodness this is finally over. Buyers, sellers, landlords, and investors can finally make a plan and get moving again.

In property markets, clarity is often the key that reopens positive conversations and unlocks transactions.

If you would like to discuss how these measures could affect your property strategy—whether you are buying, selling, investing, or reviewing your property portfolio—our team is here to help.