Confusion has overshadowed the announcement of Chancellor Rachel Reeves’ second Budget. Instead of the usual controlled rollout, the process was thrown off course when the Office for Budget Responsibility (OBR) accidentally published the full Budget report before Reeves had even begun her statement in the House of Commons.
This unusual mishap set the tone for a Budget already filled with significant tax changes, new rules, and policy shifts that have quickly drawn attention from the public and property professionals alike.
Among the biggest headlines are several measures expected to reshape how higher-value property and investment income are taxed in the coming years. One of the most notable is the introduction of a Mansion Tax, which will apply to homes valued above £2 million from 2028. Alongside this, National Insurance rates for property and dividend income will rise, and frozen tax thresholds will remain in place for an additional three years.
Families will see a major welfare change with the two-child benefit cap ending from April 2026. Drivers will notice a continued freeze on fuel duty until next September, although staged increases are planned later. Pension contributions made through salary sacrifice over £2,000 will attract tax, and electric vehicle drivers will face a new mileage-based charge from 2028.
When looking at the tax increases in more detail, the Mansion Tax alone is expected to generate around £400 million through an annual surcharge of £2,500 on homes above £2 million and £7,500 on properties worth more than £5 million. These charges will be added on top of existing council tax bills and will apply to a small proportion of the highest-value properties in England.
Other major revenue raisers include the extended tax threshold freeze, expected to bring in £8 billion; new tax rules for pension salary sacrifice, estimated at £4.7 billion; and higher tax rates on property, savings and dividends, which together will raise around £2.1 billion.
Changes for businesses include a reduced writing-down allowance rate in corporation tax, while owners of electric vehicles will face a new mileage charge that could total £1.4 billion in revenue. Adjustments to gambling tax, capital gains relief, and compliance efforts are also forecast to bring in several billion pounds collectively.
Fuel duty will remain frozen for another five months, offering temporary relief for motorists, but staged increases are already scheduled from 2026 onwards. Meanwhile, other measures, including the Sizewell C levy, contribute an additional £4.4 billion.
For the property sector, the Mansion Tax is the most talked-about change. Reeves argues the surcharge is necessary because the current system allows a Band D homeowner in towns like Darlington or Blackpool to pay almost £300 more than the owner of a £10 million home in Mayfair.
To address this, the new “High Value Council Tax Surcharge” will be introduced, although consultations will explore options for support or payment deferral. The Government expects the measure to affect fewer than 1% of homes.
Another major property-related change is the planned 2% rise in property income tax, increasing the basic, higher and additional rates to 22%, 42% and 47% respectively from April 2027. The OBR anticipates that rents may rise slightly as landlords pass on the costs, though this could be offset by lower house prices in some areas.
Reactions across the housing and property industry have been mixed. Ben Beadle of the National Residential Landlords Association warns that the measures could push rents even higher at a time when nearly one million additional rental homes are needed before 2031. In his view, the Budget does not address the country’s lack of supply.
Estate agent Jeremy Leaf suggests that while the Mansion Tax may generate limited revenue, the administrative challenge of revaluing high-value homes could be substantial. He also questions whether the cost of the exercise could outweigh the tax benefits.
Nick Leeming of Jackson-Stops expresses concern that a flat £2 million threshold does not reflect regional differences, particularly in London and the South East where prices have long been pushed up by limited stock and historic growth. He warns that homeowners who are “asset rich but cash poor” could be hit hardest, and that the revaluation process must be handled carefully to avoid errors and legal disputes.
Savills’ Lucian Cook feels that, despite months of speculation, the final version of the surcharge is less severe than many feared. He notes that the certainty may encourage buyers and sellers to move forward with decisions previously delayed. However, he also expects older owners of large homes and heavily mortgaged households to reconsider whether to stay put.
Cook adds that the changes are unlikely to dramatically affect the very top of the London market, where prices have already absorbed much of the expected risk. He does, however, believe that second-home markets could feel more pressure due to existing stamp duty surcharges and increased council tax.
Tom Bill from Knight Frank highlights concerns about years of uncertainty while revaluations take place. He also predicts that more ordinary homes—terraces, flats and semis—will gradually be pulled into the £2m bracket as prices shift over time, making the term “mansion tax” increasingly misleading.
Finally, Sarah Coles from Hargreaves Lansdown warns that the extended freeze on tax thresholds will continue pushing more people into higher tax brackets. She notes that millions have already been affected by fiscal drag, meaning pay rises can result in even larger tax bills.
Overall, the Budget marks a significant shift towards higher taxation on property wealth, investment income, and long-term assets. While it aims to raise substantial revenue, many in the property sector fear it may create new pressures for homeowners, landlords and buyers over the coming years.
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