Pre-Budget property tax speculation: what it means for the market

In a remarkable few weeks, stories have emerged in the media about a range of plans the Government seems to be considering around how to squeeze more money out of property at the upcoming Budget on November 26th.  

Updated 6 November 2025

Not all the ideas are brand new, some have already been published in papers produced by thinktanks, but all purport to offer a way of raising more money that allows the Government to stick by its pledge not to raise the rates of income tax, national insurance or VAT.  

The number of stories being published suggests that policymakers may be ‘flying kites’ – ie putting stories out about proposed changes and seeing how they land. The problem with this is that it has created a grey area in the meantime, which could lead to lower property market activity until the Budget, which will in turn impact stamp duty receipts.  

The plans around property taxes reportedly being considered, although it is likely that only one or two may be implemented, are:

• An annual tax on £2 million+ homes – the Chancellor is said to be considering a revival of a plan first mooted by the Liberal Democrats in 2012 for a ‘mansion tax’, an annual tax on homes worth more than £2 million, levied at 1% on the sum above £2 million. Someone living in a £3 million home would pay £10,000 a year.
  
  Potential impact: The move would affect around 150,000 homes across the UK, but would predominantly affect homes in London and the South East. Residents who have lived in homes in these areas for several decades since buying, as their home has  appreciated in value (average prime London property prices have nearly doubled in value since 1990) may not have the disposable income to cover these charges, which could mean some may have to move. The additional cost of owning a home in this price bracket will put downwards pressure on pricing as buyers add the charge to their calculations, which could in turn lead to a fall in stamp duty receipts. It is estimated the move could raise between £1.5billion and £3 billion for the Treasury.
• An alternative also being posited is a potential rise in Council Tax for the highest banded homes – possibly bands G and H. Council tax bands in England are calculated using values in 1991, but roughly this would mean an increased Council Tax bill for those living in homes worth £750,000 or more – and this would affect around 1 million properties. If this tax was doubled, residents would face bills of an additional several thousand pounds, and it would raise around £4 billion – but this money would go back to Local Authorities and Councils. This would indirectly save the Treasury money as it would likely be reflected in money distributed to them.
• Replacing council tax with an annual property tax of 0.44% on the value of homes worth up to £500,000 with a minimum payment of £800 a year, and a flat rate of £2,200 for homes worth more than £500,000. The current council tax paid for a property in Band D today ranges from just less than £1,000 a year in Wandsworth in London to £2,671 in Rutland. 
  
  Potential impact: Council tax reform is long overdue, with current charges still based on the value of property in 1991. However, some homeowners will see a jump in council tax payments, which will not be welcome amid the higher cost of living.  
• Replacing Stamp Duty Land Tax (SDLT) for home purchases with a tax paid when residential property is sold. The tax payable would be linked to the number of years the property has been owned. This would only apply to properties valued at more than £500,000, and the tax would be levied at an annual rate of 0.54% on the amount between £500,000 and £1m, while for homes valued at £1m or more, the additional value of the house would attract an additional 0.278% a year in tax. The tax would not be applicable to homes where stamp duty has already been paid.  
  
  Potential impact: The increasingly high rates of stamp duty payable on purchasing a home (in 1996 the tax was payable on purchases over £60,000 at 1%) acts as a drag on mobility, with residents put off upsizing and downsizing due to the cost. However, the tax is ‘one and done’. The argument runs that Introducing a tax levied by length of time spent in a home will be a big change but would incentivise those in larger houses to downsize when they no longer use all the space in their home.   Those who have already paid stamp duty are unlikely to be affected by any change, so this move wouldn’t plug any fiscal holes immediately, but scrapping residential stamp duty would immediately widen the hole in the country’s finances. The chances of the Treasury scrapping stamp duty in November are low.  
• Capital Gains Tax (CGT) applied on the sale of primary residences valued at more than £1.5m. This proposal would mean removing the principal private residence relief on the sale of homes for properties worth £1.5 million.  
  
  Potential impact: The rules excluding peoples’ main homes from CGT have been sacrosanct for decades. This would be a big move, focusing on the higher value homes across the UK, numbering in the low hundreds of thousands, compared to the near 29 million homes in the UK. It may have a counter effect however, with owners refusing to sell and staying put rather than pay the tax. In addition, a large proportion of these homes are based in London and the South of England. Average values on homes in prime central London are down nearly 20% over the last decade, so no gains to tax for buyers since 2015. For those thinking of selling a home which could be affected by any change here, the clock is ticking to secure a sale before the Budget, so worth acting sooner rather than later.  
• Applying National Insurance to rental income. Currently landlords pay income tax in their rental income, but under this proposal they would also pay NI which is levied at 8% up to £50,268 a year and 2% on earnings over this for employees.  
  
  Potential impact: More landlords, especially smaller landlords with only one or two properties, could leave the market. Their properties would enter the sales market and create more supply, but the pepper-potted nature of these rental holdings is unlikely to be enough to affect house prices. Supply of rental property, especially in the less affordable areas in the South of England will become more scarce, and could actually push up rents. Some landlords may be tempted to put their property in a company wrapper, and take dividends, but the Government may also move to include these payments in the National Insurance net. Properties worth more than £500,000 purchased by companies must pay an even higher stamp duty rate.  

These changes are just the latest in a long line of changes that consecutive Governments have introduced on the residential property market in the UK.  

Some changes, such as the introduction of EPC ratings for rental properties, to improve the UK’s carbon footprint, have laudable aims with which everyone would agree, but packaged up together they have made the landscape for landlords more challenging. Below is a run-down of the changes introduced for smaller landlords over the last decade. The one exception was a final move by the Conservative Government in March last year to cut CGT on sales of additional properties from 28% to 24% for higher rate taxpayers. 

Policymakers seem to be pushing towards a rental market which is operated by larger Build-to-Rent landlords, offering purpose-built rental accommodation. A rental market dominated by Build-to-Rent would be more akin to the market in the US (where it is called Multi-Family Housing). However, the scale of development means that we are years if not decades away from these larger landlords being able to cater for the five million households currently living in rental accommodation in the UK. Fewer than 100,000 BTR homes have been completed in the UK, with a further 60,000 under construction according to data from the BPF.  

Policy changes for landlords:  

• 2016: additional 3% charge on stamp duty for additional dwellings  

• 2017 – 2021: Tapered reduction in mortgage interest relief for higher-rate landlords to 20% 

• March 2024: Capital Gains Tax (CGT) on sale of additional properties cut from 28% to 24% for additional properties  

• October 2024: Stamp duty surcharge for domestic buyers purchasing an additional property rises from 3% to 5% 

• Late 2025: Introduction of Renters’ Rights Bill, which is expected to receive Royal Assent in September and be implemented later in the year. This will bring more security of tenure for tenants, but also increase the regulatory burden for landlords   

• EPC ratings: All rented properties to be EPC rated C by 2030 (although this is to be confirmed, and rate likely to be introduced earlier for new tenancies), meaning landlords need to make investment decisions to bring some properties to this level