Budget 2025: Reeves’ Property Tax Hikes – What UK Homeowners & Landlords Need to Know

Chancellor Rachel Reeves' recent Budget 2025 brings significant property announcements that could reshape the financial landscape for many UK individuals. With the introduction of a new 'mansion tax' and increased property income tax rates, Day-Rate Contractors, Self-Employed/Limited Company Directors, First-Time Buyers, and those with complex financial situations must understand the implications. These changes, set to roll out in the coming years, demand careful financial planning amidst an already uncertain housing market.

From April 2028, a new high-value council tax surcharge, dubbed the 'mansion tax', will apply to properties valued over £2 million (in 2026 prices). This recurring annual charge ranges from £2,500 to £7,500, uprated by CPI inflation, with deferral options for cash-poor homeowners. Affecting less than one per cent of properties, it will disproportionately impact London and the South East, particularly areas like Kensington and Chelsea. Owners of such high-value assets should begin assessing future liabilities now.

From April 2027, income tax rates on property earnings will climb by two percentage points, with basic, higher, and additional rates rising to 22%, 42%, and 47% respectively. This move, aiming to level the playing field between landlords and tenants regarding National Insurance contributions, could have profound effects. Industry experts warn of potential higher rents or fewer available rental properties, directly impacting Day-Rate Contractors or Self-Employed individuals relying on flexible housing, and potentially making it harder for First-Time Buyers saving amidst rising living costs.