The long-awaited Budget finally arrived after months of speculation, leaks and shifting expectations, culminating in a chaotic start when the OBR’s Economic and Fiscal Outlook was accidentally published early.
The uncertainty leading up to the speech had already slowed parts of the housing market, with many buyers, sellers and landlords delaying decisions. With the full package now confirmed, the property sector finally has some clarity on the direction of travel.
One of the headline announcements was the introduction of a mansion tax in the form of a council tax surcharge on properties valued at more than £2 million. This will come into effect from 2028 following a nationwide revaluation process. The measure affects a small proportion of homes across the country, but it is expected to influence prime markets, high-value rentals and second homes, particularly in London and the South-East. The lengthy valuation period means a degree of uncertainty will persist at the top end of the market.
Beyond this, the Chancellor confirmed a series of tax rises and longer-term freezes that will affect a much wider group of households. The freeze on income tax and National Insurance thresholds until 2031 means more people will be drawn into higher tax bands as incomes rise over time. This form of fiscal drag increases the overall tax burden without changing headline rates and will influence affordability for buyers and investors alike.
Reduce net returns
Additional tax increases include a two-percentage-point rise in taxation on property income, dividends and savings income. For landlords who own properties within a company structure or rely on dividend income, this will reduce net returns. For buyers and sellers, these changes may also affect investment decisions, savings behaviour and long-term financial planning.
In an immediate response to these changes, the National Residential Landlords Association (NRLA) warned that the OBR has made clear tax rises will push up rents. Chief Executive Ben Beadle said the measures will “clobber tenants with higher costs while doing nothing to improve access to the homes people need,” noting that almost one million new rental homes will be required by 2031. This reinforces a longstanding concern within the sector: rising regulatory and tax pressures risk reducing landlord participation at a time when rental demand continues to grow.
Other measures impacting the property and wider business landscape include:
• A freeze on fuel duty for five months, followed by staged increases from 2026
• A mileage-based charge for electric vehicles from 2028
• A reduction in the corporation tax writing-down allowance
• Changes to pension rules, with salary-sacrifice contributions above £2,000 to be taxed
• Higher gambling duties and additional tax administration and compliance measures
While the Budget focuses heavily on raising revenue, there are also policies aimed at lowering household costs. Measures to reduce energy bills and hold down rail fares form part of the Government’s plan to bring inflation down more quickly. If successful, this could help accelerate eventual interest-rate cuts, which would benefit buyers and mortgage-holders over the medium term.
Affordability still stretched
The OBR has upgraded the UK’s economic growth forecast from 1.0 per cent to 1.5 per cent, suggesting a slightly more resilient outlook than previously expected. Improved sentiment may offer some support to the housing market, although much will depend on how quickly interest rates fall and how households respond to the tightening tax environment.
One notable gap in the Budget is support for first-time buyers. There is no revival of Help to Buy, no new deposit assistance scheme and no changes to stamp duty to stimulate activity at the lower end of the market. With affordability still stretched in many regions, the lack of targeted help for new buyers means the first rungs of the housing ladder remain as challenging as ever.
For buyers, sellers and landlords, the overall picture is mixed. The Budget provides a clearer framework for planning, but it also brings higher tax pressures and leaves significant questions around affordability, rental supply and long-term demand. As the implications bed in over the coming months, taking informed advice and reviewing financial plans will be essential for anyone navigating the property market in 2025 and beyond.
