Autumn Budget Impact on London Property Market

The Chancellor, Rachel Reeves, delivered her Autumn Budget yesterday, though not before a ‘technical error’ from the Office for Budget Responsibility (OBR) led to many announcements being leaked ahead of time, leaving few surprises when the Chancellor stood in Parliament.

Despite months of speculation and widespread concerns over sweeping tax hikes, the final Budget turned out to be less severe than expected and is not expected to have a significant impact on landlords or the property market in general, certainly not in the short term.

Key Property Takeaways from the Autumn Budget

What’s Changing?

• Rental income tax for landlords: From April 2027, individual landlords will pay an extra 2% income tax on rental income, meaning rental income will be taxed at 22%, 42% and 47% for basic, higher and additional rate payers.

• High-Value Council Tax Surcharge (‘Mansion Tax’): From April 2028, homes valued at £2 million or more will face a new annual surcharge. Charges will range from £2,500 to £7,500:

 What’s Staying the Same?

• Stamp Duty Land Tax (SDLT): Stamp duty rates and thresholds remain as they are, providing stability for buyers.

• Options for First-Time Buyers: While the Budget didn’t introduce a new scheme, the Lifetime ISA, which helps first-time buyers save for a deposit with a government bonus, remains available.

Impact on the London Property Market

Rental Market

• There is nothing in the Budget that we believe will have a direct significant impact on the rental market, landlords or tenants, although the continued freeze on income tax thresholds announced by the Chancellor will push more people into higher bands and therefore reduce disposable income.

• The 2% increase in rental income tax is unlikely to deter most landlords, especially those holding investments within limited companies. With London rents up by around 25% over the past five years, many landlords remain financially resilient.

• If applicable, the High-value Council tax Surcharge (see below) will be payable by the landlord, not the tenant. Landlords may look to recover this in increased rents, but – like all prices increases – will depend on market conditions.

• The Renters Reform Act, effective 1st May 2026, has already influenced some landlords to sell properties, particularly those with multiple holdings. Some boroughs have seen higher levels of properties for sale than usual, although some landlords are now choosing to continue renting.

High-value Property Market: £2m+ Homes

• We don’t believe the annual High-value Council Tax Surcharge – equivalent to up to 0.125% of the property value - is significant enough to have a major impact on the market or influence owner’s decision to sell.

• Some owners, particularly those who are asset-rich but cash-poor, may be disproportionately affected, but the upcoming consultation could provide exemptions or reliefs in certain cases, and the 2028 implementation date will give owners enough time to fully consider their position.

• The Government will assess properties in 2026 via the Valuation Office Agency (VOA), focusing on council tax bands F, G, and H.

Mortgage Rates and Buyers

• The Budget includes measures aimed at tackling inflation (fuel duty freeze, energy bill caps, train fare limits), which are forecast to reduce inflation by 0.4% in 2026.

• If inflation drops below 3% (currently 3.6%), the Bank of England may cut the base rate, potentially as early as 18th December.

• Current average mortgage rates are under 5%, with some deals even lower. A base rate cut could bring rates down further - good news for buyers and homeowners.

Ready to Buy, Sell, Rent, or Invest in 2026?

With the Budget now out of the way, many uncertainties have been cleared up and we are anticipating a strong market in 2026 as buyers, sellers and tenants who had been putting off moving enter or re-enter the market. The number of people entering the market could well increase further, should there be an interest rate cut in December, bringing this below 4%.

If you would like to discuss how the recent Budget announcement affects you and your property plans, please don’t hesitate to contact our team.