When Chancellor Rachel Reeves rose to deliver her Budget on November 26th, homeowners, landlords and investors feared the worst.
Rumours had swirled in the months leading up to November. Forecasts suggested that property tax rates on houses worth £500,000 might rise, landlords would pay National Insurance, and the main homes Capital Gains Tax exemption could be scrapped. Some UK housing market commentators also predicted an increase in Stamp Duty rates.
Many of these fears turned out to be unfounded. So, what did the Chancellor include in her Budget, and how will it affect your plans to buy, sell or invest in property in 2026? Our estate agents in Ilford have joined forces with our estate agents in Newbury Park to work out how the Autumn Budget 2025 will affect you.
What are the most important changes, and when do they take effect?
From April 2027: a 2 per cent rise in income tax on property earnings.
From April 2028: properties valued at over £2 million pounds will be subject to an annual council tax surcharge. This is known as the High Value Council Tax Surcharge (otherwise called the ‘Mansion Tax’). Stamp Duty will rates remain the same.
How will UK homeowners be affected?
Currently, council tax charges are based on valuations carried out in 1991. It would be a huge task to re-assess all UK properties, so the government plans to focus on council tax bands F, G and H. Homeowners in these areas will have their properties revalued.
From April 2028, homes valued between £2 and £2.5 million will pay an annual surcharge of £2,500, in addition to regular council tax. Properties with values between £2.5 and £3.5 million will pay £3,500. At the top end of the market, homes valued at £3.5-£5 will pay a yearly surcharge of £5,000 and those above £5 million will pay £7,500.
Income tax on property earnings
In the tax year 2027/28 landlords will be required to pay 2 per cent more tax on the money they earn from property. The 2 per cent rise applies to basic, higher and additional rates of tax, paid by individuals who own property in their own name. Landlords who operate under limited company status will not be required to pay higher tax.
As a result of this change, many private landlords may be encouraged to set up their own businesses or increase rents to cover the shortfall in income. If you are an East London landlord, our friendly lettings teams will be happy to advise on the best option for you.
What should I do if my home is liable for the High Value Surcharge?
Owners of homes with an existing valuation of £2 million plus, or those who believe their properties could fall into the ‘Mansion Tax’ bracket, are advised not to make any quick decisions.
The tax changes will not take effect until April 2028, and the government is currently working on support for homeowners who may be asset rich, but cash poor.
Here are some steps you can take:
- If you are not certain about your home’s value, ask a qualified professional (our experienced valuers would be happy to provide a free valuation).
- You may be able to challenge the official valuation you receive if you think it is inaccurate.
- Seek advice from a financial adviser or accountant to understand how the tax changes will affect your personal financial situation.
- Don’t be tempted to make any structural or decorative changes that might devalue your home without first discussing your plans with a trusted professional.
- Take advice when setting the asking price for your property and be prepared to negotiate.
How have house prices responded to the Budget?
It’s usual to see a lull in housing market activity in the lead-up to a Budget, as buyers, sellers and investors wait to hear what changes lie ahead. This year, the Chancellor’s decision to delay her Budget until late autumn meant that homeowners held back their moving plans for even longer.
The Stamp Duty freeze, together with further interest rate reductions (the Bank of England’s December cut is the fourth this year), has helped to build optimism. With pre-Budget uncertainty now banished, confidence is growing and we expect the market to bounce back strongly after Christmas.
Buyers entering the market now will find a good supply of keenly priced homes. Sellers hoping for a relatively speedy sale are advised to price their properties realistically.
If you are buying or selling a property in the postcodes IG1, IG2, IG3, IG4, IG5, IG6, IG7 or E11, we would love to talk to you. If you are a landlord, our highly qualified lettings staff are always ready to provide advice and practical help.
Whatever your plans, we’ll be happy to provide insight and advice on the local market, so why not get in touch for a chat today?
Call us at 020 3972 7341 or email info@oaklandestates.co.uk.
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