Budget 2025: What Real-Estate Investors Should Know
This year’s UK Budget arrived with far less drama than many people expected. Instead of a sweeping overhaul of property taxation, the government took a more targeted approach.
The message is clear enough: property can still be an attractive asset class, but holding wealth at the very top end of the market is going to cost more.
The headline changes are focused on large ownership categories. A new surcharge on high-value homes, a minor increase to property income tax rates, and higher taxes on savings and dividends are all designed to gently tighten the financial screws on investors who treat real estate as a vault rather than a functioning asset.
For investors focused on rental demand, real occupancy and underlying performance, the picture remains manageable. For those holding property as a trophy asset, it becomes more expensive to do so.
What’s changed for property investors?
Property income is getting more expensive.
The Budget confirms a 2% increase to the basic, higher, and additional rates of property income tax from April 2027.
The new rates will be 22%, 42%, and 47% respectively.
This affects landlords and individual investors with personal rental income streams.High-value homes now carry an annual surcharge.
The High Value Council Tax Surcharge (HVCTS) will apply to domestic properties in England valued above £2 million, starting April 2028.
The charge ranges from £2,500 to £7,500 per year, depending on value.
This is in addition to existing council tax and running costs.Dividend income is also going up.
For investors who own property through corporate vehicles or receive distributions, the rate of tax on dividend income will also increase.
From 6 April 2026, the basic rate will rise from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%.
Whether this becomes material depends on how profits are structured, reinvested, or distributed.
In simple terms: the upper tiers of property ownership will become more expensive to maintain, while income from property will be taxed more heavily than before.
What Didn't Happen
The rumours were louder than the policy.
Stamp Duty wasn’t abolished. The idea of replacing SDLT with an annual tax on homes over £500,000 never made it past the headlines.
Capital Gains Tax on your main home didn’t materialise. There was serious speculation that higher value primary homes would become liable for CGT, however this never came to fruition.
There is no National Insurance on rental income. Perhaps the bigger rumour of all, some forecasts suggested a NI charge on top of income tax for landlords. That would have forced a rapid exit of small investors, however, it was never introduced — only the 2% income tax increase referenced above.
Council tax bands remain unchanged for most properties. The widely reported “mansion tax” that was meant to hit millions of households has instead turned into a narrow surcharge targeting homes above £2m.
What This Means for Investors & Landlords
None of this is catastrophic, but it does slightly change the playing field.
High-end homes – the £2m+ category – will cost more to hold. For owners who keep these properties as status assets or passive wealth stores, the new surcharge is essentially a penalty for inactivity. Over a few years, the cumulative cost will be noticeable.
For landlords, the picture is nuanced. Yes, property income is being taxed slightly heavier, but many expect those additional costs to be passed to tenants in the form of higher rents. In markets where supply is already tight rents could actually climb further.
That makes yield-focused strategies more attractive than speculative ones. Mid-market developments, regional stock, and stable rental sub-sectors (regional cities, university centres, corporate hubs) that have strong fundamentals for capital appreciation suddenly look more compelling than buying the “nicest house in the nicest postcode” and hoping appreciation does the heavy lifting.
Put simply: the Budget favours property as a living asset, not as a luxury trophy.
What to Watch and Where Opportunity Might Lie
A few real trends are worth tracking over the next 12–24 months:
Owners trading down from the ultra-prime tier. Higher holding costs may prompt some sellers in the £2–5m bracket to reposition into more liquid price bands. If that happens, competitive pressure in the lower & mid-tiers could increase, and so could transaction volume, which will only drive lower end prices up.
Rental tightening. If landlords with weaker margins rethink their portfolios, supply could shrink faster than demand. Developers have also expressed their feelings with some stating the amount of properties they’re building may also slow down, further feeding in to the already chronic supply & demand issues. Cities with strong fundamentals, student populations, young professionals, corporate relocations, will be the first to feel it, pushing rents higher.
More attention outside London. With prestige markets carrying a premium and performing more like a status symbol, cities where people actually live, work and rent – Birmingham, Manchester, Reading, Sheffield, Leeds, Bristol – become harder to ignore.
Company structures: The changes in income tax may push more people towards buying under a company structure. Whilst the personal income tax increase is small, it will make people rethink their strategy when buying and a company structure can offer some benefits that a personal name can’t.
"Our view on the Autumn Budget is that it provides a necessary degree of stability, which is highly valuable for the overseas investor," says co-founder of On Invest Siôn Bennett. "While there are certainly points within the tax adjustments that require careful planning, the absence of widespread, destabilising change means the risks we feared did not materialise, and so clears the way for strategically minded investors to focus on the long-term, opportunities available in the UK market."
If you want to discuss what this means for your buying strategy or how to best structure your portfolio, reach out.