Picture credit: Rachel Reeves ©House of Commons
Chaos surrounded the delivery of chancellor Rachel Reeves’ second Budget today.
In an unprecedented move, the Office for Budget Responsibility (OBR) accidentally released full details of what was in it ahead of the chancellor’s statement to the Commons.
As usual there were winners and losers, many of whom in the latter camp were those whose homes are worth more than £2 million and who will now be subject to a high value council tax surcharge – or mansion tax. Those with affected properties will pay a surcharge of £2,500 and those with properties worth over £5 million will pay a surcharge of £7,500. Both charges will be in addition to the current levels of council tax and will come into effect in 2028.
Other losers include landlords who will pay increased rates of income tax under the plans. From April 2027, a 2% increase will be imposed on basic, higher and additional rates of property income tax, increasing them to 22%, 42% and 47% respectively.
Sheldon Bosley Knight’s lettings director, Rebecca Dean said: “Today’s budget brings more disappointment for landlords with the announcement of higher tax on property.
“In an already challenging market and with phase one of the implementation of the Renters’ Rights Act announced to be May 1, 2026 landlords are already feeling uncertainty.
“The value of good landlords in the private rental sector is massively important and therefore stability is needed in order to retain them and encourage more investment.”
Sales manager Lisa Hunt said: “While the new mansion tax will mainly affect properties valued above £2 million, the rise in property and savings income tax from 2027 could influence investor confidence more broadly.
“For landlords, the viability of their investments will now be under review, and we anticipate an increase of portfolio sales before the April 2027 deadline and whilst this may temporarily boost stock it will reduce the long-term available rental supply.
“For prime homeowners in Stratford, the mansion tax threshold will cool the upper end of the market, causing buyers to factor in the new annual costs.
“We expect pricing pressure on properties sitting just above the proposed tax limit. For example, a property valued at £2.1m might suddenly become less desirable than one at £1.9m due to the immediate annual tax liability. This could lead to downward pressure on properties valued just over the threshold.”
Associate director and auctioneer, Matt Burrows said: “Today’s Budget signals further pressure on property owners and investors through tax reform, reinforcing the need for a clearer, more stable landscape. Certainty around property taxation is essential if we are to maintain confidence and activity in the market.”
Some businesses got a boost though as the government promised permanent lower business rates tax rates for over 750,000 retail, hospitality and leisure properties, worth nearly £900 million a year, from April 2026.
It also promised a £4.3 billion business rates support package which will cap business rates bill increases for sectors hit hardest by revaluations from April 2026.
Senior commercial agent Ben Maiden said: “The new business rates proposals are expected to ease costs for smaller high-street, hospitality and leisure properties, however high value commercial buildings will see significant increase in rates bills.
“Overall, the changes create uncertainty and could make landlords/larger tenants even more cautious about new investments in an already flat market.”
Elsewhere there were nods to planning reform and the government’s continued desire to deliver an extra 1.5 million new homes by the end of the parliament.
Head of planning and architecture, Natasha Blackmore da Silva said: ‘The Budget gives the planning sector a strong institutional push and reiterates their aim of delivering 1.5 million new homes.
“Speeding up planning approvals and pushing for large numbers of deliverable homes and supporting infrastructure is ambitious. If demand for approvals surges, even with extra planners, the existing strains on capacity and delays in decision making will be exacerbated rather than reduced.
“Success will depend heavily on delivery, resources and broader economic conditions.”
Summing up, Sheldon Bosley Knight custodian, Mike Cleary said: “Evasive action was required to stabilise the country’s finances which, when there is sufficient confidence this will happen, will reduce the current ‘wasted’ interest burden equivalent to £1 in every £10 raised in taxes.
“The Budget continues the theme of taxing those deemed to have most and so taxes intended not to hit the masses were not unexpected, with 2% on both rates of income tax and an increase to the top end of council tax seems to meet their brief.
“The pressure on landlords and high end property owners, who may not have a commensurate amount of income, builds further.
“I can’t help but think we would all be better off in the long run if everyone had shared this largely Covid-initiated problem. UK Plc has to be in rude health to reverse unemployment and grow GDP, improve tax receipts and in turn reduce the crippling interest on our debt. Let’s hope this is the last return to the well.”