Budget Takeaways – what it means for the housing market

At last, the Budget is over!

Perhaps inevitably, after the months of speculation, the measures themselves turned out to be less dramatic than many feared.

But there are two specific announcements concerning the housing market which I want to concentrate on. They may appear to affect only a small number of people, but I’m sure the impact will spread wider.

Housing measures

The first measure is the so-called Mansion Tax. Officially called a “high value council tax surcharge” and applying to homes valued at £2m or more.

This is an annual levy in addition to council tax. It will be £2,500 per year for homes valued from £2m up to £5m. It then rises to £7,500 per year for homes valued at £5m or more. 

This is estimated to directly affect 150,000 homes – about 1% of the housing stock, and once enacted in 2028, it will bag £400m a year of revenue for councils.

However, because these homes are concentrated in London and the south east of England, there will be a significant impact on the housing markets there.

My concerns are that while £2m seems a huge sum for owners in, say, Darlington or Truro, it does not buy you a true mansion in much of London! 

Some of the owners of homes currently valued at, say, £2.1m will have mortgages. So if they were to sell now, they may be tempted to downvalue their home below £2m, to make it more attractive to buyers. And likewise, once the £2m surcharge kicks in, anyone selling a house valued at slightly more than £2m will be tempted to market it for £2.25m. Well above the £2m mark – to avoid buyers bartering down the sale price to avoid the extra council tax.

In other words, the surcharge could sharply distort the market at that level.

And I’ve got an additional concern.

In order to work, the properties concerned have to be professionally valued. This is no bad thing, perhaps, because all council tax is currently based on the massively outdated house values of 1991! No government has quite had the guts to conduct a wholesale revaluation.

So for the surcharge to work by 2028, all homes that may be valued at £2m or more will have to be properly revalued. How will this be done in just two years? Will owners be able to appeal against the valuations – or possibly even mount a legal challenge? I believe getting all this done will be a tall order. 

The second Budget measure relates directly to housing concerns extra income tax payable by landlords on property income.

A 2% increase, meaning that from April 2027, landlords’ tax on basic, higher and additional rates of property income will be 22%, 42% and 47% respectively. 

As regular readers will know, I worry about the cumulative effect of rising costs on landlords.

In recent years, they’ve already seen repeated tax hikes, looming EPC requirements, and plenty of costs associated with meeting new regulations in the Renters Rights Act. Most of which comes into effect next May.

So even though this new tax burden is, relatively speaking, just a straw …. it could be the one which breaks the camel’s back.

The Budget mood music

On top of this, there’s been plenty of publicity about the general tax-raising tone of the Budget. This inevitably influences the mood of buyers and sellers alike.

There’s a total of £26 billion in new taxes, much of it coming from so-called ‘stealth taxes’. Thresholds being frozen for three years means more of us will pay higher rates of tax as time goes on and pay increases.

There is a plus side! There’s new spending on some major projects, higher minimum pay for younger workers, and more generous benefits for families.

Clarity at last

Most importantly for the housing market, though, the uncertainty is over.

Leaks about various property taxes started appearing in August and have continued ever since. These have created a ‘dead hand’ on the usually busy autumn market for buyers and sellers alike. There will now be a short period where those who were waiting-and-seeing will be able to spring into action.

But before long, the Christmas break will kick in. We think the biggest effect of this Budget will be seen early in the New Year. This is when, traditionally, many people who have considered their plans over the festive period actually take the plunge and move.

Let’s hope so – and let’s hope for a much-anticipated interest rate reduction in December to help things along.

Last Updated: January 22nd, 2026