Last week’s Budget delivered some long-trailed changes and a few new surprises for the property world. From the creation of separate property income tax rates to a new “mansion tax”, the sector is facing a fresh wave of fiscal tweaks, each with its own ripple effect on landlords, homeowners, and the wider market.
Here’s my take on what matters, why it matters, and where opportunities might lie.
1. SEPARATE TAX RATES FOR PROPERTY INCOME: A NEW ERA FOR LANDLORDS
The government has confirmed a brand-new tax structure for property income, kicking in from April 2027. Instead of being taxed alongside general income, property profits will sit in their own set of bands, much like savings and dividends do already.
The new rates will be:
- 22% property basic rate
- 42% property higher rate
- 47% property additional rate
One detail worth highlighting: finance cost relief will be locked to the 22% property basic rate. For landlords with high mortgage interest, this will be particularly important in modelling future cashflow.
On top of this, landlords are already absorbing change from the Renters’ Rights Act, which was finalised at the beginning of November. The big headline is the removal of no-fault evictions, shifting more risk and responsibility toward landlords.
Add in increased compliance and property management costs, and the pressure continues to grow. The knock-on effect? We may see more landlords choosing to leave the market altogether or passing additional costs onto tenants through rising rents.
Neither outcome solves the UK’s supply problem, but both will shape the rental landscape over the next few years.
What this means in practice
Landlords may need to re-run their numbers. For some, incorporation or restructuring could suddenly look a lot more attractive. For others, portfolio trimming or switching strategy may be the smarter move.
This is one to review early, and ideally before 2027 creeps up.
2. ENTER THE MANSION TAX, BUT ONLY FOR THE TOP 1%
A brand-new “mansion tax” has been announced for England. It’s relatively simple:
- £2,500 per year for properties valued at over £2m
- £7,500 per year for those over £5m
It’s expected to affect fewer than 1% of homes, but it’ll still be a noticeable cost for owners, especially those already paying higher council tax bands or shouldering large maintenance costs.
Why this matters now
Even for properties close to, but not over the threshold, rising valuations could bring more homeowners into scope. That raises questions around timing, future selling strategies, and planning opportunities for those in the luxury market.
3. HOUSE PRICES: GROWTH AHEAD, BUT A TOUCH SMOOTHER
Even with the above reforms, the OBR still expects house prices to continue rising over the next few years. Their forecast sees the UK average moving from £260k in 2024 to around £305k by 2030.
The expected growth path:
- Almost 3% in 2025
- Around 2.5% per year from 2026 onwards
The government’s new property income tax regime is expected to shave around 0.1 percentage points off annual growth from 2028, so a softening, not a shock.
The takeaway
We’re still looking at a steadily rising market, but without the heat of recent years. For developers and investors, that could mean more predictable planning horizons.
4. PROPERTY TRANSACTIONS: A SLOWER, STICKIER MARKET
Transactions have been on a rollercoaster over the past couple of years, and the OBR thinks that story has more chapters to come.
While sales are forecast to rise from 1.1m in 2024 to 1.3m by 2029, that number is still 155,000 lower than earlier projections.
Why fewer moves?
- Higher stamp duty costs
- Higher mortgage rates
- Older populations moving less often
- The after-effects of the stamp duty holiday pulling transactions forward
What this means
Agents, developers, lenders, and advisers should all expect a slightly stickier market. Fewer homes for sale mean more competition, but also potential pressure on housing supply and pricing dynamics.
5. RETAIL & HOSPITALITY: RELIEF ON ONE SIDE. PRESSURE ON THE OTHER.
The Budget also brought news for the retail and hospitality sectors. With the introduction of permanently lower tax rates designed to offer long-term support to operators who’ve weathered an exceptionally tough few years. On paper, that’s a positive step.
Greater certainty, fewer cliff edges, and a bit more stability in a sector that’s been anything but stable.
But there’s another angle to consider.
The continued increase in the National Minimum Wage means rising staffing costs across the board. For many operators, labour is already their single biggest expense. So while the sector may benefit from lower tax rates, wage inflation could easily eat up those gains before they reach the bottom line.
It leaves retail and hospitality businesses in a familiar squeeze: support on one side, pressure on the other. The real question now is whether the combined effect of these changes will genuinely boost profitability or simply offset the rising cost of keeping the doors open.
For investors, landlords, and operators, this balancing act will shape everything from pricing decisions to investment appetite over the next few years.
6. PUTTING IT ALL TOGETHER: A MARKET IN TRANSITION
When you step back from the individual announcements, a much bigger picture starts to emerge, one of a property market moving through a real period of transition. The tax changes, sector pressures, and legislative shifts aren’t isolated; they layer together in ways that will shape behaviours right across the industry.
For landlords, the introduction of separate property income tax rates lands at the same time as the Renters’ Rights Act removes no-fault evictions and increases compliance responsibilities. Combined with rising mortgage costs and reduced tax relief, many landlords are starting to reassess whether residential property still delivers the return and the stability they want. Some may exit the market altogether; others may push rents higher to cover the additional costs. Either way, the rental landscape is set to feel the effects.
On the other side of the commercial spectrum, retail and hospitality operators are experiencing a similar push-and-pull dynamic. The permanently lower tax rates announced in the Budget should, in theory, give these sectors a little more breathing room. But rising national minimum wages continue to squeeze margins, meaning any tax savings may be quickly absorbed by higher payroll costs. Stability is welcome, but profitability remains a tightrope.
Layer this onto broader market trends, and the story becomes clearer:
- Transaction volumes are expected to rise only modestly but remain below earlier forecasts.
- House price growth is set to continue, just at a gentler pace.
- High-value homeowners face new annual charges.
- Investors, developers, and operators are navigating a more cautious and cost-sensitive environment.
It all points toward a market finding a new equilibrium.
Not a downturn, but a recalibration. One where strategic planning, tax efficiency, and a clear understanding of sector-specific pressures will matter more than ever.
And that’s where our team comes in. As businesses and investors across residential, commercial, retail, and hospitality navigate this shifting landscape, we’ll be helping clients model the changes, plan ahead, and spot the opportunities that arise when the market moves, because transition always brings them.
HOW WE’RE HELPING CLIENTS RESPOND
Over the coming weeks, our team will be breaking down what each of these changes means in practice, from modelling the impact of the new property tax rates to advising high-value homeowners on the new annual surcharge.
We’ll be sharing:
- Practical planning tips for landlords facing the 2027 tax regime
- Insight on how the mansion tax could influence the prime property market
- Forecast-driven guidance for developers navigating the slower transaction outlook
- Sector-specific commentary from our tax and advisory specialists
If you’d like tailored guidance or want help modelling the impact of these changes on your portfolio or strategy, get in touch. We’re here to help.
