How the Budget will impact property prices, tax, and housing

The housing market has always been tightly bound to economic policy — and today's Budget is no exception. With a series of tax adjustments aimed at both high-value homeowners and landlords, the government’s financial decisions are expected to ripple through the UK property landscape over the next several years.

From a newly introduced surcharge targeting luxury homes to income tax rises on property, the latest announcements have sparked debate across the industry. Whether you're a landlord, homeowner, investor, or aspiring buyer, the effects will be felt — though very differently depending on which side of the market you sit on.

A new levy for high-value homes (the “Mansion Tax”)

One of the most headline-making measures is a new council tax surcharge on properties valued at more than £2 million, set to come into effect from 2028. Though officially titled the High Value Council Tax Surcharge, many analysts have already branded it a mansion tax.

This annual charge will sit on top of existing council tax and apply across four price bands. The structure includes:

• £2m–£2.5m: minimum £2,500 annually
• £5m+ properties: up to £7,500 annually

Given that most homes affected are located in London and the Southeast, the policy is geographically targeted — whether intentionally or not.

The Office for Budget Responsibility (OBR) expects the measure to raise £400 million per year by 2029–2030, though it will affect fewer than 1% of properties in England.

Supporters argue the surcharge introduces greater fairness by requiring owners of high-value properties to contribute more. Critics claim it could discourage high-end investment and reduce market liquidity.

Income Tax rise for property owners: A slow brake on house price growth

Another major policy shift affects landlords and those earning income from property. From April 2027, tax rates on rental and property income will increase:

• Basic-rate taxpayers: Increases from 20% to 22%
• Higher-rate taxpayers: Increases from 40% to 42%
• Additional-rate taxpayers: Ibcreases from 45% to 47%

These changes will apply across England, Wales, and Northern Ireland.

According to the OBR, this increase is expected to moderate house price growth, reducing average annual price rises by approximately 0.1 percentage points from 2028 onward.

However, this doesn’t mean prices will fall. Forecasts still show growth - just at a slower pace. Average UK house prices are expected to climb from £260,000 in 2024 to nearly £305,000 by 2030.

Transaction volumes and mortgage market outlook

Beyond prices, the OBR forecasts a meaningful shift in transaction activity. While sales are expected to grow from 1.1 million in 2024 to 1.3 million by 2029, this figure is still around 155,000 fewer annual transactions than previously predicted.

Why the drop?

• Higher stamp duty remains a barrier.
• The increased tax burden may discourage landlords from expanding portfolios.
• Mortgage rates are projected to rise from 3.7% in 2024 to around 5% by 2029, slightly higher than earlier forecasts — further cooling demand.

Collectively, these pressures could result in a slower, more cautious property market.

What does this mean for the future of housing?

The Budget signals a broad shift: a move away from incentivising investment-led ownership, especially at the higher and rental ends of the market. Instead, the government appears to be prioritising revenue generation and attempting to rebalance equity in the tax system.

The likely consequences include:

• Luxury homeowners. Higher annual costs; possible downward pressure on high-end valuations
• Buy-to-let landlords. Reduced rental profitability; potential for portfolio slimming
• Renters. Possible rent increases as landlords pass on higher costs
• First-time buyers. Slightly slower price growth — but affordability remains challenged
• Investors. More cautious long-term property strategies

The Budget marks a turning point in how property is taxed and treated in the UK economy. While headline-grabbing policies such as the so-called mansion tax affect only a small proportion of households, the broader increases in property income tax and rising mortgage rates will have a wider-reaching influence. The result? A property market likely still to grow — but more slowly, more selectively, and with greater cost burdens for those holding or investing in high-value or income-producing homes.

Whether these measures ultimately stabilise the housing market or simply create new pressures remains to be seen - but for now, the Budget has ensured one thing: property remains firmly in the economic spotlight.

If you have any questions or need help with your property portfolio, don’t hesitate to contact our experienced and trained property experts on 0161 511 5339 or complete our contact form.