UK Budget 2025: What property professionals need to know

Chancellor Rachel Reeves delivered her second Budget on 26 November 2025, and the property market can breathe a collective sigh of relief. The widely feared £500,000 property tax did not materialise, removing a cloud of uncertainty that had caused one in five movers to pause their plans. However, the Budget still contains significant measures affecting homebuyers, sellers, landlords, and conveyancing professionals—from a new mansion tax on £2 million-plus homes to increased taxation on rental income. Here's everything you need to know.

Relief as the £500,000 property levy is shelved

The most anticipated announcement—or rather, non-announcement—was confirmation that no new annual tax on properties valued above £500,000 will be introduced. In the weeks preceding the Budget, speculation had intensified around proposals that could have affected roughly 210,000 homes currently on the market above this threshold.

The removal of this uncertainty should reinvigorate buyer activity, particularly across London and southern England where a significant proportion of properties exceed £500,000. Estate agents report that pre-Budget hesitation was pronounced in these regions, with Zoopla data showing buyer demand for £1 million-plus properties down 11% year-on-year in October.

The existing stamp duty framework remains intact. Since 1 April 2025, buyers in England and Northern Ireland pay SDLT on properties above £125,000 (the nil-rate threshold having reverted from the temporary £250,000 level). First-time buyers retain a £300,000 threshold on properties up to £500,000. The higher rate surcharge for additional dwellings stays at 5%, having risen from 3% in October 2024.

For conveyancers, this continuity means no urgent system updates or client communications regarding new property levies. The focus can remain on navigating the April 2025 SDLT threshold changes that many clients are still coming to terms with.

The mansion tax arrives for homes over £2 million

The headline property announcement was the introduction of a new High Value Council Tax Surcharge—effectively a mansion tax—applying to properties valued above £2 million from April 2028. The annual charges are:

• £2,500 for properties valued between £2 million and £5 million
• £7,500 for properties valued above £5 million

Fewer than 1% of properties nationally will be affected, with approximately 85% of impacted homes located in London and the South East. The Valuation Office Agency will undertake new valuations based on 2026 prices, and homeowners will be able to challenge these assessments.

Local authorities will collect the surcharge alongside council tax, though revenue flows directly to central government. The Treasury has indicated it will consult on deferral options for asset-rich, cash-poor homeowners.

Tom Bill, Head of UK Residential Research at Knight Frank, warned of ongoing uncertainty: "Until the revaluations take place, buyers and sellers face years of uncertainty, especially around the £2m threshold. Even once completed, new valuations can be challenged, which would prolong the limbo."

For conveyancers handling prime property transactions, this introduces a new consideration for client advice. Properties close to the £2 million threshold may see pricing behaviour adjust, while some high-value homeowners may accelerate sales before April 2028.

Landlords face higher income tax from April 2027

Perhaps the most significant change for the buy-to-let sector is the 2 percentage point increase in income tax rates on property income, effective from April 2027:

• Basic rate rises from 20% to 22%
• Higher rate rises from 40% to 42%
• Additional rate rises from 45% to 47%

The Office for Budget Responsibility has explicitly warned this measure will "reduce returns to private landlords" and could "drive up rents" if supply contracts. The National Residential Landlords Association (NRLA) called the policy "clobbering tenants with higher costs."

This comes atop the 5% additional dwelling surcharge (up from 3%) introduced in October 2024, and the abolition of the Furnished Holiday Lettings tax regime from April 2025. Former FHL properties now lose access to full mortgage interest relief, capital allowances, and Business Asset Disposal Relief—a significant hit for holiday let owners planning to sell.

Ben Beadle, NRLA Chief Executive, stated: "Almost one million new homes to rent are needed by 2031. But this Budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need."

Conveyancers should expect continued landlord portfolio restructuring throughout 2026-2027, potentially driving transaction volumes in the investment property segment as some landlords exit the market.

Stamp duty: no new changes but threshold reversion biting

While no new SDLT changes were announced, the April 2025 threshold reversion continues to affect the market. Key current rates for England and Northern Ireland:

Standard residential rates (from 1 April 2025):

• £0–£125,000: 0%
• £125,001–£250,000: 2%
• £250,001–£925,000: 5%
• £925,001–£1,500,000: 10%
• Above £1,500,000: 12%

First-time buyers (from 1 April 2025):

• Nil-rate threshold reduced from £425,000 to £300,000
• Maximum property value for relief reduced from £625,000 to £500,000

A first-time buyer purchasing at £400,000 now pays £5,000 in SDLT, compared to zero during the relief period. For a £500,000 property, the bill rises from £3,750 to £10,000.

The OBR forecasts that transaction volumes will be 155,000 lower per year by 2029 compared to previous projections, partly reflecting these higher upfront costs.

Housing supply gets a £39 billion boost

On the supply side, the Budget delivers the largest investment in social and affordable housing in a generation. The Social and Affordable Homes Programme (SAHP) will invest £39 billion over ten years (2026–2036), targeting 300,000 new homes with at least 60% for social rent.

Additionally, the new National Housing Bank—a publicly owned subsidiary of Homes England—has been allocated £16 billion in capacity, including £2.5 billion in low-interest loans for housing providers. The government expects this to unlock £53 billion in additional private investment and support delivery of over 500,000 homes.

Planning reforms announced alongside the Budget should deliver an additional 170,000 homes by 2029-30, with funding for hundreds more planners across England and a default "yes" for developments around train stations.

For conveyancers, increased housebuilding activity should translate to higher transaction volumes in the new-build segment from 2027 onwards, particularly in areas benefiting from the SAHP allocation.

Capital gains tax and inheritance tax hold steady

Despite pre-Budget speculation, no changes were made to Capital Gains Tax rates for property disposals. Residential property CGT remains at 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers (having reduced from 28% in April 2024). Critically, Private Residence Relief is retained—main homes remain exempt from CGT.

Inheritance Tax thresholds also remain frozen, though changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026 will affect farming families. The first £1 million of combined agricultural and business property retains 100% relief; amounts above receive only 50% relief (creating an effective 20% IHT rate).

Economic outlook affects affordability

The OBR's forecasts provide important context for property market sentiment:

• GDP growth: 1.5% in 2025, 1.4% in 2026
• Inflation: 3.5% in 2025, falling to 2.5% in 2026
• Bank Rate: Currently 4%, expected to fall to approximately 3.5% by end-2026
• House prices: Forecast to grow at roughly 2.5% annually, broadly in line with wage growth

Mortgage affordability has actually improved, with September 2025 showing the lowest proportion of average salary required for mortgage payments (34.3%) since November 2022. However, the average rate on existing mortgage stock is projected to rise from 3.7% to 5% by 2029 as fixed deals expire and borrowers refinance at higher rates.

Real household disposable income growth is forecast at just 0.25% annually through 2030—constrained by fiscal drag as frozen tax thresholds push more earners into higher brackets. This may temper discretionary property purchases despite nominal wage growth.

What this means for conveyancing professionals

The Budget brings both challenges and opportunities for conveyancing practices:

Transaction volume outlook: The OBR projects annual transactions of approximately 1.3 million by 2029, up from around 1.1 million currently. However, this represents 155,000 fewer transactions annually than previously forecast, suggesting modest rather than buoyant market conditions.

Landlord restructuring: Expect continued portfolio sales as landlords respond to cumulative tax increases. The April 2027 income tax changes give a clear deadline for decision-making, likely generating transaction activity through 2026.

High-value market recovery: With the £500,000 property tax threat removed, prime market activity should resume. Knight Frank forecasts house prices rising 2.5% in 2025 and 3% in 2026.

New-build opportunities: The £39 billion SAHP and planning reforms should generate substantial new-build conveyancing work from 2027 onwards, particularly for practices serving housing associations and registered providers.

Regional variation: London and the South East face more uncertainty from the mansion tax, while northern markets benefit from continued infrastructure investment and relative insulation from high-value property measures.

Devolved nations follow different paths

It's worth noting that property taxes are substantially devolved. Scotland's Land and Buildings Transaction Tax (LBTT) and Wales's Land Transaction Tax (LTT) are unaffected by UK SDLT changes. The mansion tax and property income tax increases apply in England only (with Northern Ireland following England for income tax).

Scotland's Budget, delayed to 15 January 2026, will set its own course on property taxation. The Scottish Government has indicated it will engage with Westminster on whether to adopt similar property income tax rates.

The verdict: relief tempered by caution

Lucian Cook, Head of Residential Research at Savills, captured the market sentiment: "After what must have been the most prolonged exercise in kite flying in the run up to a Budget, the introduction of an annual tax surcharge for properties worth over £2m, at levels somewhat lower than many will have feared, is probably the least worst outcome for owners of prime property."

Property prices are forecast to rise modestly—Savills predicts 1% growth in 2025 (revised down from 4%), recovering to 2% in 2026. The consensus is that certainty, even imperfect certainty, beats the paralysis of speculation.

For homebuyers and sellers, the message is clear: the anticipated property tax assault largely failed to materialise. For landlords, further erosion of returns continues. For conveyancers, transaction volumes should stabilise and gradually recover as market confidence returns, though the heady days of pandemic-era activity remain distant.

The market now has the clarity it needed. The coming months will reveal how quickly that translates into renewed activity.