Property industry reaction to Autumn Budget

Property industry experts have warned that Chancellor Rachel Reeves’ Autumn Budget decision to raise income tax rates on property income will hurt tenants.

Ms Reeves confirmed in the Budget tax rates on dividends, property income and savings income will rise by 2 percentage points.

The Chancellor also announced a new High Value Council Tax surcharge of £2,500 on properties over £2m and a surcharge of £7,500 on properties valued over £5m.

Increased property tax reaction

Aneisha Beveridge, head of research, Hamptons said: “On its own, adding 2% to headline rates of income tax charged on property income isn’t going to break the bank. It will add around £70 a year to the tax bills of both lower-rate and higher-rate taxpayers with homes in their personal names, significantly less than adding National Insurance to rental income.

“However, given the way landlords are taxed, if their mortgage interest credit isn’t also increased in line with the rise, it could add up to £227 to average landlord tax bills.”

Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “Despite claims of tackling cost of living pressures, the government is pursuing a policy that the Office Budget Responsibility has made clear will drive up rents.

“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.”

Jonathan Stinton, head of mortgage relations at Coventry Building Society, said: “Hiking property income tax won’t just hit landlords, it will hit renters in the pocket too. When the cost of being a landlord rises, those pressures almost always find their way into monthly rents, meaning those who don’t own a home pay the price. A similar rise to tax on dividends means the cost will also go up for landlords who hold their property in a limited company.

“The more landlords are taxed the less appealing it is to let a property, which could lead to fewer landlords and reduced choice for landlords. The simple but powerful forces of supply and demand would then push rents higher, making it much more difficult to rent a home. First-time buyers who are trying to save a deposit while renting could especially struggle and worry that their homeownership dreams are pushed even further out of sight.”

Smaller landlords will be hit

Critics also warn smaller landlords will be hardest hit by the changes.

Sián Hemming-Metcalfe, operations director at Inventory Base, said: “Landlords may have avoided a National Insurance surcharge, but the two percent increase in property income tax will still land heavily with those operating within the rental sector.

“Smaller individual landlords are already working through one of the biggest operational shifts the sector has seen in years as the Renter’s Rights Act beds in. Many are investing in upgraded processes, property standards and compliance systems, and this extra tax cost arrives precisely when their outgoings are rising rather than falling.

“Although incorporated landlords may absorb the change more easily, the amateur and accidental landlords who rely on rental income as part of their household finances are far more exposed. They tend to act conservatively when the rules keep shifting, and they are often the first to reduce investment or withdraw from the sector entirely.

“In a rental market that is already struggling with a chronic lack of stock, anything that accelerates that trend will be felt by tenants long before it is felt by policymakers. Stability, not additional pressure, is what the sector needs now.”

Sam Humphreys, head of M&A at Dwelly, said: “The rise in property income and dividends tax presents all types of landlords with yet another obstacle to adapt to at a time when they are already absorbing significant operational changes under the Renter’s Rights Act. Despite this additional pressure, the sector remains profitable, but the margin for error is undoubtedly narrowing.

“Smaller individual landlords, in particular, now face a more complex environment where every regulatory and financial shift has a meaningful impact on day-to-day decision-making.”

Vann Vogstad, founder and CEO of COHO, says: “It will be the tenants as well as landlords who pay the price for the Chancellor’s move to increase Property Income Tax by 2% by April 2027.

“Landlords have become an easy political target and now they will be faced with an additional 2% on basic, higher and additional rates, taking them to 22%, 42% and 47% respectively. This tax hike, especially when coupled with the upcoming Renters’ Rights Act reforms, will inevitably result in higher rents. That’s just basic economics.

“In the cases where tenants can’t afford the rent, landlords will be forced to sell. This won’t help renters onto the property ladder as demand for housing remains strong and prices are unlikely to fall meaningfully. Instead, we’ll see more properties acquired by large corporate landlords, who tend to prioritise shareholder value over tenant wellbeing.”

Industry reaction to Mansion tax

The Chancellor also announced that properties worth more than £2 million will face a surcharge of at least £2,500 from 2028, rising to £7,500 a year for homes valued at £5 million or more, measures widely dubbed a “mansion tax.”

Brendan Kay, managing director of Parkers Properties, said: “The proposed mansion tax will hit local people who aren’t multi-millionaires, but instead are often long-term owners whose home value has crept up over the decades, often thanks to inflation and local demand or work they have done on their properties.

“The mansion tax will be hugely challenging to implement as it will require the first revaluation of council tax bands in more than 30 years. The tax is only forecast to raise around £400million annually, but how much will it cost to roll out and then administer the scheme on an ongoing basis?

“Anyone who finds themselves falling into the new mansion house trap is likely to appeal, adding further delays and complexity. The whole policy could end up being a zero-sum game and may never actually get implemented.

“The mansion tax, which starts at homes valued at £2million, isn’t a clever way to target the ultra-rich, it’s a stealth wealth grab which threatens to stall the housing market, burden homeowners and hurt people who played by the rules. Taxing paper wealth as if it’s cash in hand, that simply isn’t fair.”

Timothy Douglas, head of policy and campaigns, at Propertymark, said: “Many property agents and consumers will be left scratching their heads that after months of speculation and the expectation of large-scale changes to Stamp Duty nothing has materialised. All this has caused is uncertainty and people to wait and see which is not helpful for market activity and ultimately economic growth.

“A High Value Council Tax Surcharge will disproportionately hit certain parts of the country and impact property valuations going forward.

“Overall, with the UK government’s ongoing target to build 1.5 million homes it is surprising that the UK government’s Budget does not include a wide-ranging package of support for people to get onto or move up and down the property ladder.

“With an average deposit for first-time buyers currently sitting around £60,000, ultimately, this feels like a missed opportunity to support renters, home buyers and sellers and promote greater economic activity through the housing market.”

Michael Shapiro, commercial property partner at law firm Spencer West LLP, said: “The thresholds presented by the Chancellor mean there could be inequity. In some areas of the country, £2 million would buy a nice country house befitting of the term “mansion”, but in central London, you might only expect a 2-3-bedroom flat in a mansion block.

“My view is that regulations would need to be adapted to reflect the higher-value property market in London and other high-value areas of the country. This surcharge comes into effect in 2028, so we await further clarity as to whether the “mansion tax” is a one-size-fits-all approach.”