Budget 2025: How it affects agents, landlords, homeowners and buyers

The government published its 2025 Budget on 26 November, and there are some big takeaways for housing professionals. We take a look at the key announcements.

But first, what are the top three takeaways for estate and letting agents?

• Your sales valuations may need to change as buyers aim to avoid new “Mansion Tax” thresholds

• Landlord retention could be an uphill battle in 2026 as a hike to their Income Tax puts pressure on them to sell up

• ISA rule changes may reduce first-time buyer activity

Income tax surcharge for landlords

Landlords in England, Wales and Northern Ireland will pay higher Income Tax on their property income from 6 April 2027. Property Income Tax rates will be set 2% above the regular rate of Income Tax for that tax year, making them:

• 22% for income between £12,571 and £50,270

• 42% for income between £50,271 and £125,140

• 47% for income over £125,141

Property income will be taxed before savings and dividend income, but after any other form of income such as employment or pensions. A landlord who makes £50,000 from their day job and £10,000 from their property investments would therefore pay the 42% property higher rate on all income over £50,271.

The government has also rejigged rules on allowances and reliefs, including the £12,570 personal allowance. These will now be applied to income that isn’t from property, savings or dividends first, meaning that more of landlords’ income will attract property Income Tax.

However, the basic rate relief for mortgage interest payments will be applied at the new property basic rate of 22% instead of the current rate of 20%.

And the rumour that National Insurance could be applied to rental income also hasn’t come true, saving landlords from a potentially much higher tax bill than the Income Tax adjustment.

High-value properties to attract “Mansion Tax”

A new High Value Council Tax Surcharge will be applied to high-value homes in England from April 2028. Homeowners will be charged:

• £2,500 a year for properties worth £2 - 2.5m

• £3,500 a year for properties worth £2.5 - 3.5m

• £5,000 a year for properties worth £3.5 - 5m

• £7,500 a year for properties worth over £5m

Properties will be valued by the Valuation Office in 2026, and then revalued every five years. From 2029-30, the charges will be increased in line with CPI inflation – but the government hasn’t said if the thresholds will be updated. Many of the details will be consulted on next year.

The vast majority of properties won’t be touched. Estate agency Knight Frank estimates that 190,000 homes will be affected when the new tax comes into force in 2028. At last count (in 2023), the Department for Levelling Up, Housing and Communities estimated that there were 25.4 million homes in England.

But for those high-priced homes, the Treasury estimates that it will knock an average of 2.5% off the value, or £50,000 off a £2 million home.

ISA limits could hold back first time buyers

From 6 April 2027, savers under 65 will only be able to put £12,000 a year into a cash ISA, down from £20,000 currently. That includes cash Lifetime ISAs. Savers will still be able to hit the £20,000 limit by investing in a stocks and shares ISA or an Innovative Finance ISA, but they may prefer to avoid these higher-risk options if they plan to buy within a couple of years.  

On the other hand, while it wasn’t discussed in the Budget, the government is also reportedly looking into replacing the Lifetime ISA. A consultation could begin early next year.

What the government didn’t do

As always, there were a lot of property-related rumours flying around before the Budget, and most of them didn’t pan out.

• The government was reported to have looked into scrapping stamp duty ahead of the Budget. On the day, though, stamp duty was untouched.

• Apart from the “Mansion Tax”, there were no updates to Council Tax bands, despite reports that the government was looking into adding some new ones as has been done in Wales.

• Capital Gains Tax (CGT) will not be applied to the sale of high-value primary residences. The Chancellor had reportedly considered applying CGT to primary residences over £1.5 million.

• Local Housing Allowance was frozen again, putting rising rents further out of reach for the tenants who rely on it. According to affordable housing company SimplyPhi, just 1.7% of privately rented homes in England were affordable at LHA rates in Q3 2025.

More broadly, the government didn’t do anything to encourage investment in the private rented sector. The most recent English Private Landlord Survey showed that 31% of landlords are planning to scale back their portfolios (including 16% who want to sell up completely), while just 7% plan to grow their portfolios. Large-scale business landlords are the most likely to want out, which could have an outsize impact on private rented sector supply.