Budget 2025: What It Means for the UK Housing Market

The Chancellor released the 2025 Budget today, and it includes some of the most significant housing-related tax changes we’ve seen in recent years. Whether you’re a homeowner, investor, landlord, or considering a move in 2026, these new measures will shape the direction of the UK property market for years to come.

Below is a clear breakdown of what has changed and what it means for you.

1. New High-Value Property Surcharge (“Mansion Tax”)

From April 2028, the Government will introduce a High Value Council Tax Surcharge (HVCTS) on homes in England valued at £2 million or more.

This surcharge will sit on top of normal council tax and will apply whether the property is your main home, a second home, or part of a rental portfolio.

Although the final banding will be updated closer to implementation, the Budget confirms that the measure is designed to increase annual taxes on the wealthiest homeowners.

What this means

▪️Owners of high-value homes may reconsider holding onto large properties long-term.

▪️London, Surrey, Hertfordshire and prime commuter towns will feel this most.

▪️Some sellers may choose to list before the surcharge arrives.

2. No Changes to Stamp Duty Land Tax (SDLT)

Despite months of speculation, the Budget left Stamp Duty unchanged.

This means:

▪️First-time buyers receive no new help.

▪️Home movers continue with the current SDLT brackets.

▪️Investors pay the same 3% surcharge on additional properties.

What this means

The government is avoiding any short-term boost to the housing market. Transaction volumes are likely to remain stable, with no incentive-driven surge.

3. Higher Tax on Rental & Property Income

Landlords and property investors are among the biggest groups affected.

From April 2027, tax on property income (rental profits and asset-based income) rises to:

▪️22% basic rate

▪️42% higher rate

▪️47% additional rate

These are significant increases that will affect most private landlords.

What this means

▪️Smaller landlords may find it harder to stay profitable.

▪️Some will exit the market or sell underperforming rentals.

▪️Rents may continue rising due to shrinking supply and ongoing demand.

▪️Professional landlords (HMOs, BTR, serviced accommodation) may continue to expand as smaller operators retreat.

4. No Changes to Capital Gains Tax or PPR Relief

The Budget confirmed:

▪️No increase to CGT on home sales.

▪️No changes to Private Residence Relief.

▪️No CGT surcharge for landlords disposing of properties.

This stability will be welcomed by investors planning disposals in 2026.

5. Wider Economic Direction: Taxing Wealth Over Wages

The overall theme of Budget 2025 is clear:

▪️Higher taxes on wealth-related income (dividends, property income, savings).

▪️Little change to wages or personal allowances.

▪️No stimulus for homebuyers.

This signals a long-term shift toward:

Taxing assets more heavily while leaving earned income largely unchanged.

How this Will Affect the Property Market in Practical Terms

▪️High-value property demand may cool

▪️The surcharge will make £2m+ homes more expensive to own.

▪️In London and Home Counties, some owners may choose to downsize sooner.

▪️More landlords may sell

▪️Profit margins will tighten, especially for:

▪️Highly leveraged landlords

▪️Those with older, low-yield stock

▪️Landlords facing EPC upgrade costs

This could increase the supply of ex-rental homes in some areas.

Rents likely to keep rising

As more landlords exit, rental supply reduces, especially in major cities where demand already outstrips stock.

Shift toward HMOs & affordable rentals

Investors may move into:

▪️HMOs

▪️Multi-let conversions

▪️Affordable BTL across the Midlands & North where yields remain stronger.

 Developers may reconsider high-end projects

Prime developments may slow. Mid-market and suburban schemes remain strong.

What Buyers, Sellers & Investors Should Do Now

Sellers of £2m+ homes: Consider planning ahead. The surcharge lands in 2028, but market shifts will start earlier.

Landlords: Review your portfolio profitability now. 2026 may be the best year to restructure, refinance, or dispose of certain assets.

Buy-to-let investors: Look at high-yield areas (HMOs, commuter towns, student towns); these remain resilient.

First-Time Buyers: With no SDLT reform, buying conditions remain unchanged. 

Final Thoughts

Budget 2025 delivers a clear message: Wealthy homeowners and landlords will shoulder higher taxes, while the wider housing system sees minimal reform.

For London and Greater London, where property values and rental demand remain strong, these changes will trigger shifts in strategy for sellers, buyers, and investors.