Ahead of Rachel Reeves’s second Budget under the Labour government, widespread speculation about potential property tax changes created uncertainty and slowed activity in the housing market. Although the Budget did introduce several tax increases, many anticipated property-related measures were not included. With the uncertainty now eased, the announcement is expected to encourage both buyers and sellers to return to the market.
No new annual tax on homes over £500,000
Concerns about a potential new annual tax on homes worth over £500,000 caused the housing market to slow in recent weeks, but the Budget confirmed that no such tax will be introduced. Instead, only high-value properties over £2 million will face additional taxation through reforms to the council tax system. This will come as significant relief to owners of the roughly 210,000 properties currently for sale above £500,000, and buyer demand—especially in London and southern England—is expected to strengthen as 2026 approaches. Estate agents and housebuilders now have an opportunity to capitalise on renewed confidence by adjusting their marketing strategies ahead of the traditional surge in activity around Boxing Day and the New Year.
New property tax on the highest value homes
As expected, the Government will introduce a Council Tax High Value Supplement for properties in England valued at £2 million or more. This measure affects only about 0.5% of homes, the vast majority of which—around 85%—are located in high-value areas of London and the South East. The Chancellor indicated that the additional annual cost will be roughly £2,500 for a £2 million home and up to £7,500 for properties above £5 million—an increase that is lower than many had anticipated.
The extent to which the £2 million threshold creates a pricing “cliff edge” remains uncertain and will depend heavily on how the scheme is implemented. Although homes over £2 million represent just 0.6% of total transactions, they contribute more than 20% of stamp duty revenues. The new levy could temporarily reduce sales, but it may also prompt some owners to sell sooner to minimise ongoing costs.
Rise to property income tax rates for landlords
The Chancellor has confirmed that from April 2027, landlords will face higher property income tax rates, with the basic, higher, and additional bands rising by 2 percentage points to 22%, 42%, and 47% respectively. This change adds to an already challenging landscape for landlords, who are grappling with stricter rules under the Renters’ Rights Act, tighter energy efficiency requirements, and last year’s increase in stamp duty on additional property purchases from 3% to 5%.
With these cumulative pressures, the role of letting agents becomes even more critical. Agents should proactively review landlord portfolios to quantify the impact of the upcoming tax changes and demonstrate how their expertise can reduce financial risk and ensure full compliance. This environment also presents a growth opportunity: with around half of landlords still self-managing, agents can position themselves as essential partners in navigating an increasingly complex regulatory and tax framework.
No changes to stamp duty rates or thresholds
Although broader tax changes that could have affected the mainstream housing market have been avoided, stamp duty continues to pose a major barrier for home buyers—particularly in southern England. Stamp duty thresholds for existing homeowners have not been updated since 2014, despite house prices increasing by 47% over that period. This mismatch has created significant fiscal drag, pushing more buyers into higher tax brackets and raising the overall cost of moving.
As a result, the proportion of existing homeowners paying stamp duty equivalent to more than 2.5% of their purchase price has risen sharply—from 21% in 2019 to 33% today. The growing tax burden is hitting buyers of average-priced homes in many southern towns, strengthening the case for abolishing stamp duty as part of wider reforms to modernise the property tax system.
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