After plenty of rumour and speculation, the Chancellor Rachel Reeves finally delivered the much-anticipated Autumn Budget. The fiscal event set out the Government’s tax and spending plans as the Chancellor looks to plug a well-documented multibillion-pound black hole in the nation’s finances. The result was a range of tax rises totalling £26 billion, taking the UK’s tax burden to its highest ever level.
While tangible support for buyers and sellers was perhaps thin on the ground, there were several measures announced that will influence and impact the UK’s housing market. Below we break down the key takeaways from the Autumn Budget.
What was rumoured but NOT announced
New annual property tax – Ahead of the Budget, there was plenty of speculation about a new annual property tax on homes worth over £500,000. Initial rumours suggested rates starting at 0.54% and rising for homes over £1 million. This however did not feature as part of the Chancellor’s plans.
Changes to stamp duty – The annual property tax was supposed to replace stamp duty, and eliminate the tax on homes below this bracket entirely – however this did not come to fruition. Instead, the Chancellor decided to keep current arrangements intact. While some would have preferred reform or outright removal, at least there is stability and consistency.
What was announced
New “mansion tax” on homes over £2 million – Instead of national property tax, the Chancellor opted for a so-called mansion tax on high-value properties. This annual surcharge, starting at £2,500 and rising to £7,500 for homes worth £5 million or more, will come into effect from April 2028.
It is a move that is likely to impact fewer than 1% of properties in England, according to the Treasury. Nonetheless, it will be an important consideration to those looking buy a new home in this bracket, or indeed trying to sell.
Higher tax on landlords – While the rumour of landlords paying National Insurance (NI) on their rental income did not materialise, the Chancellor did confirm that landlords will pay a higher rate of income tax – increasing by two percentage points. From April 2027, the basic rate will rise to 22%, the higher rate to 42%, and the additional rate to 47%.
According to the Office for Budget Responsibility (OBR), this change is likely to push up rents, adding further pressure on those saving for a deposit. In its economic forecast, the Office for Budget Responsibility (OBR) said the increase is likely to drive up the cost of rents – adding further pressure to those renters trying to save for a deposit.
A boost to planning – In more positive news, the Chancellor also announced £48bn of additional funding to increase capacity in the planning system and recruit more planning professionals. The move is designed to speed up the planning process and get more new homes built – helping the Government to deliver on its mission to build 1.5 million homes in this parliament.
Also important to know
While perhaps not directly relating to home buying or selling, the blockbuster Budget included a number of announcements that could impact household finances, affordability or prospects more broadly.
This includes:
- Increase in minimum wage – a move that will that mean pay rises for millions of people
- Two-child benefit cap scrapped – families will be able to claim universal credit or tax credits for additional children – instead of just their first two. Combined with wage increases, both measures could boost household income or disposable cash – supporting with saving or better managing household costs. Many lenders will also factor in key benefits into income and affordability calculations
- Tax thresholds frozen – The thresholds at which we pay more tax will remain frozen until 2031. This means that if you receive a pay rise, you could be dragged into higher tax bands
- Changes to savings – The amount you can save each year into a tax-free ISA has been reduced from £20,000 to £12,000 per year. It is designed to increase spending, but could impact some mortgage rates as savings deposits are often used by banks and building societies to fund new mortgages
- Uplift to benefits and pensions – In addition to some benefits, including all the main disability benefits, the state pension will increase in April. The state pension will rise by 4.8% in line with average wages. Although, the government did also scale back pension contributions through salary sacrifice schemes with employers.
In short, the Budget avoided additional punitive property taxes for many buyers and sellers – particularly those already in the market in modest family homes. This greater certainty around property taxes, as well as increasing sentiment around a potential cut to interest rates by the Bank of England in December, will all likely contribute towards an increase in confidence among potential buyers and sellers, and a potential increase in activity.
For working households, extending the freeze on tax thresholds may take more money out of future payslips and mean less disposable income to save or manage household costs. This could be offset though by an increase in benefits and the removal of restrictive child benefit caps for larger families.
What should you do next?
Now the Budget is delivered, those who were waiting and seeing can now get their plans back on track. Whether you’re looking to buy, move or to sell, an important place to start is to review your current circumstances and understand your own budget. A qualified mortgage and protection adviser will be able to support you in this process and help you work out where you currently are and navigate the options that are most suitable for you.
Whether you’re a first-time buyer, a second-stepper, someone downsizing or a buy-to-let landlord, the mortgage market offers a range of options to support borrowers of all backgrounds and circumstances. The same is true for those set to remortgage too.
To really understand what the Budget means for you and your plans, there’s no better place to start than with expert advice and an appointment with your local mortgage adviser.
To book your appointment with a mortgage adviser, please get in touch here (tel no./ email address).
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