The Chancellor has announced a series of property-related tax changes in today’s Autumn Budget as part of plans to address a reported £20 billion shortfall in public finances. After months of speculation, the outcome is far less dramatic than many feared, but still significant for certain segments of the market.

Key points at a glance

• The much-discussed annual property tax on homes worth more than £500,000 has been avoided, which is expected to boost market confidence after months of hesitation.
• A new “mansion tax” will apply to homes valued above £2 million, affecting around 0.5% of UK properties, with 85% of those located in London and the Southeast.
• Stamp duty remains unchanged, meaning buyers in lower-value markets continue to pay relatively modest amounts, although outdated price bands mean more people are paying higher stamp duty over time.
• Landlords will face increased income tax rates on rental earnings, adding further pressure to an already stretched rental sector.

Property taxes more stable than expected

This is the Chancellor’s second Budget since the change of government, and while it included multiple tax increases, property taxation avoided the sweeping reforms that many had anticipated.

In recent months, rumours of potential changes, including expanded Capital Gains Tax, annual property levies and taxation of rental income, created uncertainty across the housing market. Today’s announcement provides clarity, although not without consequences for some groups.

No annual tax on homes worth over £500,000

One of the most significant revelations is what won’t be introduced: there will be no new annual tax on homes valued above £500,000.

This brings relief to the owners of around 210,000 properties currently on the market over this price point. The removal of uncertainty is expected to release pent-up demand and encourage more buyers, particularly in London and southern England where a large proportion of properties exceed £500,000.

Stamp duty will continue in its current form.

• Buyers in England and Northern Ireland still pay stamp duty on homes over £125,000.
• First-time buyers continue to benefit from a threshold of £300,000 on homes costing up to £500,000.
• The tax remains a one-off cost paid on completion.

Without the introduction of an annual tax, sellers will not need to reduce prices to compensate for ongoing charges, and the feared “cliff-edge” around the £500,000 level, where demand might have bunched below the threshold, has been avoided.

Overall, continuity will likely support a steadier and more predictable market heading into 2026.

A new ‘mansion tax’ for £2 million-plus homes

A new high-value property surcharge, already being referred to as a “mansion tax” will apply from 2028.

This additional annual council tax charge will affect just over 100,000 of the highest-value homes, all worth more than £2 million.

The Chancellor confirmed:

• Properties valued above £2 million will face an additional annual charge of £2,500.
• Properties above £5 million will face an additional annual charge of £7,500.

For a £2 million home, this is less than double the current average council tax bill and notably lower than many predicted.

As around 85% of these homes are located in London and the Southeast, the impact will be geographically concentrated. There may be short-term disruption in these markets as sellers and buyers adjust to the new rules, and some owners may choose to bring forward plans to sell.

However, because this affects only the highest-value segment of the market, most households remain unaffected.

Higher property income tax for landlords

Landlords will face additional tax pressure from April 2027, as income tax rates on rental earnings are set to rise by 2 percentage points across all bands:

• Basic rate will increase to 22%
• Higher rate will increase to 42%
• Additional rate will increase to 47%

This comes on top of last year’s increase in stamp duty on additional homes, which rose from 3% to 5%, and alongside new regulatory obligations such as the Renters’ Rights Act and upcoming energy efficiency requirements.

Landlords have already faced rising costs for several years, and this latest rise represents another reduction in post-tax rental income. However, rent levels have increased by 25% over the past five years, which has helped offset rising costs for many landlords.

What does this mean for the market?

Today’s Budget avoided the most disruptive reforms that had unsettled the market in recent months. The decision not to introduce an annual tax on £500,000+ homes will likely revive buyer confidence, especially in the South where activity had slowed sharply.

The new mansion tax will primarily affect a small, high-value segment of the market, while the increase in landlord income tax will place further pressure on the rental sector, potentially contributing to continued rent rises if supply tightens further.

Overall, the Budget restores some stability, but the long-term impact will depend on how buyers, sellers and landlords respond over the coming months.