Autumn Budget 2025 - Proposed Property Tax Reforms

The Chancellor of the Exchequer, Rachel Reeves, has delivered the Autumn Budget 2025. Within the Autumn Budget 2025 are proposed property tax reforms. This article considers the key proposed property tax reforms, why the reforms are being introduced and who they are most likely to impact.

Key Proposed Property Tax Reforms

• High Value Council Tax Surcharge – The highly publicised “mansion tax” was confirmed in the Autumn Budget 2025 in the form of a council tax surcharge on properties valued at over £2 million. The council tax surcharge is expected to range from £2,500 - £7,500 annually on properties worth over £2 million, which will be collected alongside the existing council tax. The property values are expected to be based on new valuations carried out by the Valuation Office, reflecting their value in 2026 rather than at the last point of purchase. The values are then used to allocate the properties into one of four council tax bands which will determine the council tax surcharge payable per year.
• Higher Landlord Income Tax – The Autumn Budget 2025 has also outlined a proposed increase of 2% on income tax on rental income for landlords. From April 2027 the basic, higher and additional rates of income tax will increase to 22%, 42% and 47% respectively.

Why have these proposed property tax reforms been introduced?

One of the main reasons the proposed property tax reforms have been introduced is to make the tax system “fairer for the future” as our economy changes. The Chancellor indicated the hike in income tax for landlords is to account for the landlords not paying National Insurance on rental income. While delivering the budget, the Chancellor said “a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no National Insurance is charged on property, dividends or savings income. It’s not fair that the tax system treats different types of income so differently”.

Another reason for the proposed property tax reforms is likely to raise revenue. Labour’s manifesto during the 2024 general election campaign said it “will not increase National Insurance, the basic, higher or additional rates of Income Tax, or VAT”. Due to these tax pledges by Labour, the Chancellor likely needed to raise other taxes, including property taxes, to raise revenue. The Budget expects the “mansion tax” alone to raise £0.4 billion for the Government by 2031, whilst the increase in landlords’ income tax is expected to raise £0.5bn in revenue per year.

Who are these proposed property tax reforms likely to impact?

As council tax is a devolved matter, the “mansion tax” is most likely to impact homeowners of properties in England valued at over £2 million. The owners of properties in England valued at £2 million to £2.5 million are expected to pay a £2,500 council tax surcharge and those with properties valued at £5 million or more are expected to pay £7,500 council tax surcharge per year.

Sole trader landlords who hold properties in their own names will also be particularly affected by the increase in tax on rental income. Consequently, this could also have a knock-on effect on tenants, in the form of higher rents.

What happens next?

Over the coming days MPs can debate the various tax measures outlined in the Autumn Budget 2025. The debate is due to conclude on Tuesday 2nd December 2025. The proposed tax reforms can come into effect if the House of Commons agrees to them at the end of the final day of debate, but the Finance Bill needs to pass for the proposed reforms to be given permanent legal effect.

In the context of the proposed property tax reforms, the increase on income tax on rental incomes for landlords will take effect from April 2027, whilst the “mansion tax” is expected to take effect from April 2028.

If you would like any further information or advice on the information mentioned within this article, please contact Oonagh Monaghan from our Real estate team.

*This information is for guidance purposes only and does not constitute, nor should be regarded as, a substitute for taking legal advice that is tailored to your circumstances.