Autumn Budget 2025 – changes related to property taxation for private clients

As widely anticipated following general press speculation, at the Autumn Budget 2025 on 26 November 2025, the Government announced the introduction of what has been colloquially termed a “mansion tax”. This new charge combined with an increase in the income tax rate for property income form part of the Chancellor’s wider package of measures aiming to raise further revenue from wealth and assets (without going so far as to introduce a full “wealth tax”).

There were a number of other announcements in relation to important changes to the taxation of individuals, including in respect of inheritance tax, capital gains tax, the temporary non-residence rules and the offshore anti-avoidance rules. An explanation of these announcements is beyond the scope of this article.

High Value Council Tax Surcharge (“HVCTS”)

What is the HVCTS and how will it work?

With effect from 1 April 2028, a new annual High Value Council Tax Surcharge (colloquially referred to as a “mansion tax”) will be levied on owners of residential properties in England valued at and above £2 million.

Initially, the Valuation Office will conduct a targeted valuation exercise to identify in scope properties, with fewer than 1% of residential properties in England expected to qualify. It is unclear how long the targeted valuation exercise will take, but it will have to be completed in time for the planned introduction date of 1 April 2028. Thereafter, revaluations will occur on a five-yearly basis.

The HVCTS will apply to residential properties that are valued at and above £2 million as follows:

The rates are set to increase in line with CPI inflation from the 2029/2030 fiscal year onwards, subject to any other decisions to amend the rates outside of the inflationary uplift mechanism.

The surcharge will be payable by homeowners rather than occupiers and will sit alongside existing Council Tax obligations. This raises important questions about how the surcharge will interact with landlord–tenant arrangements, given that under the current system tenants, as occupiers, are typically responsible for Council Tax payments. The forthcoming consultation will be critical in clarifying these issues and ensuring the rules are workable in practice.

Given that local authorities will be fully compensated for the additional costs of administering the HVCTS (which they will do alongside existing Council Tax), we will need to wait to understand quite how much of the £430 million headline planned annual revenue projection will, in practice, be raised by the Government. This in turn raises the spectre of higher HVCTS charges in future in order to meaningfully raise tax revenue.

Further details awaited

A public consultation in respect of the detailed rules of the HVCTS will take place in early 2026. This is expected to cover, among other things, potential reliefs and exemptions, and proposed rules for complex ownership structures (companies, funds, trusts, partnerships) and tied properties (i.e. where occupation is a condition of employment).

It has also been confirmed that a support scheme is intended to be introduced targeted at those who may struggle to pay the charge (i.e. those with limited liquidity despite significant property wealth). Again, while the details of any support scheme is noted to be a key area for consultation, early speculation suggests that deferral arrangements (e.g. until the sale of the property and / or death of the owner) could be possible. The interaction of any such mechanisms with existing tax regimes will need to be considered (for example, any coinciding inheritance tax charges on death).

Increase in the income tax rates for property, savings and dividend income

Property income

The Government has announced the introduction of separate income tax rates for property income. Property income refers to any income derived from letting land or buildings, most commonly, rental income.

With effect from 6 April 2027, i.e. the 2027/2028 tax year, such property income will be taxed under its own separate income tax rates, as follows:

• property basic rate – 22%;
• property higher rate – 42%; and
• property additional rate – 47%.

This represents an increase of two percentage points for every band as against the non-savings, non-dividend income tax rate that currently applies to property income.

Finance cost relief will continue to be available to unincorporated landlords, but it will be provided at the property basic rate of 22% only. The rate of withholding on income tax applied under the Non-Resident Landlords Scheme on property income arising to landlords outside the UK is also expected to increase to the property basic rate.

The Budget confirmed that the UK intends to participate in a new international agreement to tackle tax evasion by providing for the automatic exchange of readily available information on real estate from 2029 or 2030.

Savings income and dividend income

For completeness, we note that with effect from 6 April 2026, the income tax rate on dividend income will rise by two percentage points in respect to both the ordinary rate (which will increase from 8.75% to 10.75%) and the upper rate (which will increase from 33.75% to 35.75%). The additional rate will remain unchanged at 39.35%.

With effect from 6 April 2027, the income tax rate on savings income will rise by two percentage points across all bands. The basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%.

Importantly, the way individuals self-assess and pay tax on property, savings, and dividend income will remain largely unchanged.