There’s always plenty of speculation before an Autumn Budget, however, this year was extraordinary, with much discussion around possible Stamp Duty and Council Tax reform.
Many will be relieved to hear that Stamp Duty remains untouched for now, although buyers who were hoping to take advantage of a “buy now, pay later” scheme may be disappointed. Irrespective, there is at least certainty that Stamp Duty is not changing, which should give those who were hesitating about moving a little more confidence to get going.
A new yearly surcharge on properties over £2 million
The biggest change for the property market is the introduction of what’s already being called a ‘mansion tax’, coming into effect from April 2028. Homes valued above £2 million will face an additional yearly charge of £2,500 on top of their usual council tax bill. For homes worth more than £7 million, that surcharge jumps to £7,500 a year.
This move is largely driven by the huge variation in current council tax bills, an issue rooted in valuation bands that haven’t been updated since 1991. As a result, some owners of lower-value homes can end up paying proportionately more than those in significantly higher-value properties, depending on where they live. While a full overhaul of the council tax system would be complex, applying an extra charge to the highest-value homes is a simpler way to start addressing the imbalance.
Although less than 1% of households will be affected nationwide, the impact could fall heavily on homeowners in London, where property prices are much higher than in other parts of the UK.
Where high-value properties are further concerned, we had mentioned in our earlier blog that there was speculation that certain high-value properties would lose an exemption from Capital Gains Tax, whereby CGT is not payable on the sale of a main residence . This measure was not included in the Budget and in fact no changes were made at all to Capital Gains Tax.
Changes to property income tax
Landlords will also see changes, with a 2% increase to both the basic and higher rates of property income tax. Rachel Reeves highlighted that, under the current system, “a landlord earning £25,000 a year will pay less in tax than tenants earning the same amount.” Whilst the principle behind this move appears fair – that landlords should be taxed at similar levels on the income they make from their property, as tenants do on their income – critics are concerned that landlords will address the additional burden by charging more in rent.
Despite a noticeable dip in activity in the lead-up to the Budget, we’re optimistic that buyers and sellers who were waiting for clarity will now feel more confident about progressing their moves, knowing they can budget with confidence in terms of any Stamp Duty or Capital Gains Tax they may need to pay.
