Chancellor Rachel Reeves has announced a range of property tax adjustments in her first Budget, aimed at reshaping the investment landscape for landlords and property buyers.
Effective from midnight, the stamp duty surcharge for additional properties, including buy-to-let investments and holiday homes, will increase by 2%. This brings the surcharge from its previous rate of 3% up to 5%, significantly raising the cost for buyers of secondary properties. This hike is likely intended to level the playing field between those purchasing investment properties and those entering the housing market for the first time.
Furthermore, Capital Gains Tax (CGT) on non-residential assets will see notable increases. The basic rate will jump from 10% to 18%, while the higher rate will rise from 20% to 24%. These increases will impact those selling non-residential assets such as commercial properties and other investment assets outside the residential sector. Notably, CGT rates on residential properties are not affected by this change, with rates holding steady at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.
The Chancellor’s changes signal a shift in policy likely to affect landlords and investors across the property sector, encouraging closer scrutiny of tax implications when buying or selling property assets.
The Conservative government has announced an extension to the Inheritance Tax threshold freeze, initially set to end in 2028, which will now continue until 2030. Under this policy, the first £325,000 of any estate remains exempt from inheritance tax, with no planned increases in this threshold for the foreseeable future. While this may provide continuity for estate planning, critics argue that the prolonged freeze indirectly raises tax burdens due to inflation, potentially capturing a greater share of estates that might have previously fallen below the threshold.
For employers, the forthcoming changes are likely to have a more immediate financial impact. From April next year, National Insurance contributions for employers will increase from the current rate of 13.8% to 15%. Additionally, the income threshold at which employers begin to pay these contributions will be lowered significantly, from £9,100 to £5,000. This shift means that many businesses, including those in the property and letting agency sectors, will see higher operating costs, impacting everything from staffing to expansion plans.
These fiscal adjustments are part of what Chancellor Rachel Reeves openly described to MPs as a “Budget of tax rises and spending cuts,” which aims to generate approximately £40 billion in combined savings and revenue. The Chancellor acknowledged that these measures are essential in addressing the current economic pressures while working towards long-term fiscal stability. Though the new budget reflects a cautious approach, it underscores the government’s prioritisation of rebalancing public finances in the face of a challenging economic environment, even as businesses and individuals brace for higher tax obligations and tighter spending constraints.
The announcement has sparked considerable debate, with some applauding the government’s dedication to economic prudence, while others worry about the cumulative impact of tax rises, particularly for small to medium-sized businesses that might struggle with the increased payroll costs. For those in the property sector, these tax adjustments, combined with recent increases in property-related levies, signal a clear message from the government: a continued push to stabilise public finances, albeit with a reliance on revenue generation from tax contributions across multiple economic segments.
Rest of the Budget Overview
Personal Taxes
The freeze on income tax and National Insurance thresholds is set to end in 2028, meaning individuals can avoid being pushed into higher tax brackets as wages increase. Capital Gains Tax on profits from selling shares will rise, moving from a maximum of 20% to 24%, although the rates for additional property sales will remain unchanged. Additionally, the Inheritance Tax threshold freeze, initially extended to 2028, will now continue through to 2030.
Business Taxes
From April, businesses will start paying National Insurance on employees’ earnings above £5,000, a reduction from the current £9,100 threshold, and the rate will rise from 13.8% to 15%. However, the Employment Allowance, which reduces National Insurance liabilities, will increase from £5,000 to £10,500. Private equity managers will also see higher tax rates on their profit shares, rising from 28% to 32%. The main corporation tax rate on profits exceeding £250,000 will remain at 25% until the next election, providing stability in corporate tax obligations.
Transport, Alcohol, and Tobacco
For public transport, the cap on single bus fares in England will rise from £2 to £3 come January. The 5p fuel duty reduction on petrol and diesel, due to end in April 2025, has been extended by another year. Private jet passengers will face a 50% increase in Air Passenger Duty, while tobacco tax will rise by 2% above inflation, with a higher increase of 10% for hand-rolling tobacco. Alcohol taxation will see an uplift for non-draught drinks by the RPI inflation rate, whereas draught drinks will benefit from a 1.7% tax cut.
Housing
The current budget for affordable homes, scheduled until 2026, receives a boost of £500 million. Social housing providers are now allowed to increase rents above inflation through a multi-year plan, potentially improving housing availability. In England and Northern Ireland, the Stamp Duty surcharge on second home purchases will increase from 3% to 5%.
Wages, Benefits, and Pensions
From April, the legal minimum wage for over-21s will rise to £12.21 per hour, while the rate for 18 to 20-year-olds will increase from £8.60 to £10 as part of a broader strategy to align towards a “single adult rate.” Full-time carers will benefit from expanded eligibility for allowances, as the earnings threshold for qualification rises from £151 to £195 per week.
The budget’s sweeping changes are set to affect nearly every sector, impacting both individuals and businesses. With these adjustments, the government aims to address current economic challenges while providing gradual relief and incentives across key industries.