The Budget: What You Need to Know

The Budget: What You Need to Know
We have prepared this update on the Autumn Budget, to provide you with clarity on what the changes mean for the property market.

The Autumn Budget landed yesterday, later than usual and after months of rumour about property tax changes. Between the speculation on reforms, stamp duty issues and rental licensing requirements, it’s been an unsettling few months for homeowners and buyers alike.

Now we finally know what’s actually happening.

The OBR Leak

Following months of speculation and rumour, the Budget leaked an hour before Rachel Reeves delivered her statement – and the culprit was the OBR itself.

In an unprecedented breach, the Office for Budget Responsibility accidentally revealed two property tax measures that would affect parts of the UK market.

Here’s what actually matters for homeowners.

‘Mansion Tax’

The widely anticipated mansion tax is coming – though not until April 2028. Officially called the High Value Council Tax Surcharge, it will affect homes worth more than £2 million (based on 2026 valuations).

The annual charge starts at £2,500 for properties over £2 million, rising to £7,500 for those over £5 million. Importantly, it’s payable by the owner, not the occupier.

How will this work?

Properties over the £2 million mark will be banded based on their value, with charges rising annually in line with CPI inflation from 2029/30 onwards. Revaluations will happen every five years.

The Implementation Headache

This is where it gets tricky. Properties will be valued in 2026, but the tax doesn’t start until April 2028 – creating a prolonged period of uncertainty for buyers and sellers near the threshold. Even once valuations are done, they can be challenged, dragging the uncertainty out further.

The mechanics present real challenges. Around 30% of properties in England haven’t changed hands since Land Registry records began in 1995. Valuing homes that haven’t sold for decades with scarce comparables will inevitably trigger disputes and appeals, potentially dampening transaction activity.

The five-year revaluation cycle adds another complication – a home valued at £1.9 million today could easily breach the threshold in the next cycle.

Putting It in Perspective

HM Treasury expects fewer than 1% of properties in England to exceed the £2 million threshold. Knight Frank reports around 150,000 properties currently worth over £2 million across England and Wales, estimated to rise to 180,000 by 2028.

Rightmove data shows less than 0.5% of sales agreed this year have been for properties over £2 million, with around 1% of homes for sale priced above this level.

Pre-Budget Anxiety

The uncertainty began at the Labour party conference on 29th September, when Rachel Reeves left the door open to higher property taxes. In the months that followed, rumours circulated about stamp duty reforms, council tax overhauls and a potential mansion tax – and the effect on market confidence was tangible.

Rightmove surveyed over 10,000 people who were actively moving or considering a move.
17% had paused their plans entirely due to tax uncertainty.
Of those aware of the rumoured changes (61%), 79% said they were concerned.

Unsurprisingly, those aged 55 and over were most anxious (81%) – the rumoured reforms predominantly targeted higher-value homes.

The data showed the market had already started reacting.
Sales agreed for homes over £2 million were down 13% year-on-year, whilst Zoopla reported drops in buyer demand, sales agreed and new listings above £1 million. The higher end of the market had essentially hit pause ahead of the Budget.

Relief for the £500k+ Market

The widely-speculated tax on homes over £500,000 has been avoided and should provide a boost to activity in this price sector, which accounts for approximately 25% of the market, following a drop in activity from both buyers and sellers in recent months according to both Rightmove and Zoopla.

Rightmove had reported homes between £500,000 and £2 million had seen sales agreed drop by 8% in the run up to The Budget, but Zoopla believe the confirmation that there will be no new annual tax on properties valued above £500,000 and the removal of uncertainty should bring relief to the owners of roughly 210,000 properties currently on the market above £500,000 as they expect buyer demand to strengthen as we head into 2026.

Income Tax On Rent

From April 2027, income tax on rental income for landlords will rise by 2%, with basic, higher and additional property income tax rates set to increase to 22%, 42% and 47% respectively. This change will reduce profits for landlords.

To offset these additional costs, some landlords will look to increase rents, whilst others may choose to exit the market, particularly smaller landlords who are already feeling the pinch from increased legislation, compliance, tax and higher interest rates.

The changes announced are not due to come into force until 2027 (landlord income tax changes) and 2028 (mansion tax), meaning any movers or homeowners affected have plenty of time to plan and assess what the changes might mean for them.

OBR Forecasts

The OBR is predicting that mortgage rates will rise from around 3.7% in 2024 to around 5% in 2029, 0.2 percentage points higher than its March forecast, which it said will “weigh on transactions.”

The OBR also expects the increase to property income tax rates from April 2027 to reduce house price growth by around 0.1 percentage points a year from 2028.

The average house price in the UK is forecast to rise from £260,000 in 2024 to just under £305,000 in 2030, expected to grow by just under 3% in 2025 and average 2.5% from 2026.

Property transactions are forecast to rise from just under 1.1 million in 2024 to around 1.3 million in 2029. This is around 155,000 fewer transactions a year than the OBR’s March forecast by 2029.

The OBR said:

“Our lower forecast for property transactions over the medium term is because we have lowered our assumed turnover rate (the ratio of the total housing stock to housing transactions) to better reflect the impact of past increases in average stamp duty.”

Market Reaction and Mortgage Rates

Gilt yields were largely unmoved following The Budget. Moneyfacts reported a slight drop in their average mortgage rate, though the markets were caught off guard by the OBR forecast being mistakenly released before the Chancellor’s statement.

News of the higher headroom target initially saw gilt yields fall, with the 10 year rate down 8bps to 4.42%, but this then reversed fairly quickly and rose back up to 4.54%. The volatility continued with yields falling again to 4.45% yesterday afternoon.

GDP Outlook

The OBR forecasts that GDP will grow by 1.5% in 2025, above the 1% expected earlier this year.

However, the outlook was downgraded from what the fiscal watchdog projected in March, with the economy now expected to expand by 1.4% in 2026 (below a previous forecast of 1.9%).

GDP is estimated to expand by 1.6% in 2027 (against March’s estimate of 1.8%), a 1.5% rise in 2028 (down from a predicted increase of 1.7% in March), and 1.5% in 2029 (not 1.8% as previously expected).

The Bottom Line

The Budget delivered stability rather than shock. The council tax surcharge on homes over £2 million and the landlord income tax rise affect less than 1% of the market, with implementation not until 2027 and 2028.

For the mainstream market, this Budget was about what didn’t happen:
no tax on homes over £500,000,
no stamp duty overhaul,
no council tax revaluation.

The feared changes simply never materialised.

The removal of uncertainty is the most valuable outcome. The 17% of movers who paused their plans can now proceed, and the 210,000 properties above £500,000 currently on the market should see renewed interest.

The OBR forecasts steady, sustainable growth: house prices rising broadly in line with earnings, transaction volumes gradually recovering, and mortgage rates showing early signs of stabilising. The focus can now shift back to fundamentals: employment, wages and affordability.

After months of speculation, the property market has the clarity it needed. For 99% of buyers, sellers and homeowners, nothing has fundamentally changed – and that’s a platform for renewed confidence heading into 2026.