How does the Budget affect the property market?

The Chancellor, Rachel Reeves, has announced several tax changes in the latest Budget as she works to close a reported £20bn gap. For months there have been plenty of rumours about what might be introduced, with talk of higher Capital Gains Tax or new charges for landlords. Now we finally have clarity.

One of the biggest points is what won’t be happening. There will be no new yearly tax on properties valued above £500,000.
This removes a lot of uncertainty for owners and buyers, especially across London and the South where many homes sit in this price range. With the idea off the table, confidence is expected to improve as we head into 2026.

Stamp duty rules also remain the same. Buyers still start paying from £125,000, and first time buyers keep their higher £300,000 allowance on homes priced £500,000 or below.

From 2028, a new surcharge will apply to properties worth more than £2m. This is being widely referred to as a mansion tax.

Homes just over £2m are expected to see an extra £2,500 added to their annual bill, while those above £5m could pay around £7,500 more.

Landlords will see their property income tax rates rise from April 2027. Basic, higher and additional rate bands will each increase by 2 percent, bringing them to 22 percent, 42 percent and 47 percent.

This follows last year’s rise in stamp duty for second homes, which moved from 3 percent to 5 percent. Renters will not be taxed directly, but some may feel the effects if landlords choose to pass on extra costs.

What does this mean for inflation and mortgages?

Inflation is expected to average around 3.5 percent this year but could drop to 2.5 percent in 2026, bringing it much closer to the Government’s target. The Budget changes are predicted to push inflation down by a further 0.4 percent.

If inflation continues to fall, we should see the Bank of England reduce the base rate, which normally leads to cheaper mortgages. That would be good news for both new buyers and those looking to remortgage.

So overall, while there are increases in some areas, lower inflation and potentially lower mortgage rates could balance things out. With property prices rising more slowly than inflation, the market remains in a relatively steady place for buying or selling.

If you’d like to find out how the Budget might affect your property directly, get in touch with us and we’ll be happy to help.