On 26 November, Chancellor Rachel Reeves delivered the Government’s Autumn Budget, which includes several changes, including those in the property sector. We have narrowed down the key takeaways to how this would affect the market:
Mansion Tax on homes worth more than £2 million
The speculation on the Autumn Budget has caused a slowdown in the property market, specifically due to the Mansion Tax.
Homes valued over £2 million will now need to pay an annual surcharge called the Mansion Tax, from April 2028. This will be on top of the Council Tax, which is an extra £2,500 (starting price). This surcharge will need to be paid by the owner, not the occupier.
The Chancellor has also pointed out that there will be a ‘targeted valuation exercise’ every five years to determine which surcharge band applies to the property.
Income Tax to increase by 2% on rental income
Landlords will now need to pay an additional 2% income tax on rental income, from 2027. These changes will mean a reduction in landlord net returns. It is likely this will lead to higher rents across the UK as landlords look to manage the additional costs, which could in turn impact the rental market on a broader scale. For landlords with smaller portfolios or lower rental yields, they may choose to exit the market entirely.
It has been widely reported that the property market is currently at some of the highest levels seen in recent years, and any measures that place additional pressure on landlords can have a domino effect throughout the sector. Targeting landlords often results in higher operational costs, which can cascade into increased rents and ultimately affect tenants and the wider rental market.
Stamp Duty
Despite the rumours over the last few months that there could be a change in Stamp Duty, the Chancellor made no mention of Stamp Duty; therefore, no changes.
Who does this affect?
Since speculation on the Autumn Budget, the sales market has slowed down, buyers wanting to know how to proceed before investing. Now that it has all been confirmed, the market and everyone involved can proceed with their plans with more certainty.
An increase in costs for all landlords means it’s likely to affect everyone, renters and homeowners alike. Increasing costs for landlords means it’s likely to cause an increase in rents, and the surcharge on tax for homes over £2 million could slow down the sales market.
If you have any questions, please feel free to speak to one of our friendly team, 02077956525.
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