The UK government presented its 2025 Autumn Budget to Parliament yesterday with a clear intention to plug a large hole in public finances. The Budget relies heavily on the addition of personal and property-related taxes. Some of these measures will have a material long-term impact on the UK housing and mortgage market.
Key Highlights:
Personal tax threshold freezes were extended for another three years beginning in 2028-29. This extends the fiscal drag on incomes — more payers pushed into higher tax bands as wages rise, reducing after-tax affordability for mortgage borrowers.
A new, recurring annual council tax charge called the high value council tax surcharge applies to properties worth more than £2 million from April 2028. This could lead to market distortion, regional disparity, reduced property transactions, and uncertainty in the market. As a result, we would expect a 5% to 10% correction in the prices of high-value properties and some impact on properties below the thresholds.
The Budget increases the rates of income tax from property income by two percentage points starting in April 2027. The new move would mean an additional annual tax burden for landlords who are already feeling squeezed.
Looking ahead, the outlook remains challenging. With the Office for Budget Responsibility forecasting average mortgage rates to climb from 3.7% to 5.0% over the next five years, affordability will continue to erode–particularly when combined with stagnant real incomes and tightening monetary conditions. The buy-to-let sector faces a “perfect storm”, and the inevitable result will be a contraction in rental supply and a subsequent spike in rental prices.
Here are a few thoughts from those inside the property industry.
Ian Jones, Director at Backhouse, comments: “While today’s announcement could have been worse, it remains a missed opportunity for the housing sector. There was no mention of targeted support for first-time buyers or adjustments to stamp duty, both of which could have provided a meaningful boost to the market and wider economy. Overall, the government’s reluctance to harness the economic power of housebuilding is disappointing.
“Without measures to stimulate demand, supply will inevitably suffer, leaving SMEs particularly exposed as build costs rise and margins are squeezed further. The rental sector also faces further pressure, with additional taxation discouraging investor activity, risking reduced supply at a time of high demand resulting in consequential higher rents to tenants.
“Looking ahead, a reduction in the Bank of England base rate before Christmas will be critical to improving confidence. With mortgage rates easing, we may see a modest rebound in the new year, but ultimately, the lack of targeted housing support in this budget leaves the industry without the stimulus it urgently needs.”
Sheetal Smith, Sales & Marketing Director, Pennyfarthing Homes said: “If I were to use an analogy on the budget, I would say it’s like fruit tea – you wish tasted better, but in the end, you are just left with coloured water.
“The housing industry hoped for the return of a Help-to-Buy style initiative. While we would certainly welcome it, it was clear it wasn’t going to reappear at this budget. That said, there are some positives. Increased support for backing apprentices through small businesses and SME’s is encouraging and will help strengthen the construction workforce for the future.
“Investment in high streets, infrastructure and local schools is also welcome. Strong local amenities create thriving communities where the new home developments we build can succeed. Anything that supports our towns and villages is a step in the right direction.
“However, the Budget still falls short on measures that would meaningfully increase housing supply. The planning system remains slow and under-resourced, and without targeted support for first-time buyers and developers alike, the industry simply cannot deliver the homes the country urgently needs.”
Michael Cook, Chief Executive Officer, LRG stated “Well, Rachel Reeves has hit the market with a Budget that lands with impact, hasn’t she? Today’s Budget reaches into every part of how people live, move and make decisions about their homes. We knew there would be little in the way of good news, and in many respects, it delivered exactly what had been signposted. This comes at a time when the UK is already carrying the highest tax burden in 70 years, and growth remains flat, with GDP rising by just 0.2 % last quarter. With interest rates still elevated and real household disposable income up by only 1.2%, households were already feeling the strain. And with income tax thresholds frozen since 2021 and remaining unchanged for the rest of the decade, people will continue to pay more tax each year even if earnings only rise with inflation; by 2028, someone on £40,000 will be paying around £900 more annually as a result of that freeze alone.
“The new High Value Council Tax Surcharge is the headline measure for property. While it is undeniably a tax on aspiration, it is notably less severe than previously floated. Council tax bandings have not been reviewed since 1991, so change is overdue, but tackling only the very top end risks feeling punitive rather than proportionate. We should also question how viable this surcharge will be in practice: monitoring valuations and collecting the charge will be challenging, and with implementation not due until 2028, this Government may not even be in office to see it through. There is every chance the measure could be revisited or scrapped long before it takes effect. Even so, any shift in behaviour among owners of higher-value homes will feed into the wider market, as activity at this level plays an important role in unlocking chains further down.
“The decision to increase tax on savings, dividends and property income by 2% is also unhelpful, but if I am honest, better than I anticipated…. For landlords, higher taxes arrive alongside the Renters Rights Act and wider regulation, adding to already significant pressures. While most landlords want to remain in the sector, increased costs inevitably influence the homes they keep and the rents they charge. History shows that when operating costs rise, they tend to flow through to tenants, making this a back-door stealth tax on renters rather than landlords. Even in Parliament today, Kemi Badenoch highlighted the risk that higher taxes on landlords places upward pressure on rents, noting that tenants are the ones most exposed when costs rise.
“One notable absence from the Budget was any movement on Stamp Duty. Reforming SDLT remains one of the most effective ways to improve liquidity and encourage both first-time buyers and second movers to take the next step. A missed opportunity here means the market is still without the incentives that would stimulate activity and support the wider economy.
“Capital Gains Tax was also left untouched. That is not a surprise and, arguably, a positive. The Chancellor will know that investment, entrepreneurship and risk-taking are essential if the UK is to grow. We cannot tax our way to economic recovery, and maintaining CGT rates supports those who are putting capital to work, creating jobs and driving long-term growth.
“Overall, this is a Budget that brings change, but perhaps not as severely as many feared. If the government wants long-term stability, greater investment and more choice for families, future decisions must prioritise clarity, balance and practical support, rather than adding further layers of cost onto a market that is already feeling the pressure.”
Sanjay Joshi, Director at Lawsons & Daughters, a London estate agent, said: “With so little in the Autumn Budget to stimulate the housing market, the uncertainty that’s been holding things back is likely to persist. Aside from the newly revealed council tax surcharge on £2m+ homes, there’s nothing here to boost confidence or give the market direction.
There’s plenty of headline noise, but not enough clarity to genuinely reassure the wider market – especially buyers and sellers at the lower end of the scale, where confidence has been most fragile.
Similarly, landlords remain unsettled too. Many are already planning to sell up, with new legislation coming in 2026, and the increase in tax rates on income from property will only fuel that sentiment.”