1. New high-value property surcharge (“Mansion Tax”) from April 2028
- What is it?
A new annual surcharge on homes valued at over £2 million, payable in addition to existing council tax. - When does it start?
April 2028, based on property valuations as of 2026. - Bands and charges:
- £2m–£2.5m: £2,500 per year
- £2.5m–£3.5m: £3,500 per year
- £3.5m–£5m: £5,000 per year
- £5m+: £7,500 per year
- Impact:
Fewer than 1% of UK homes will be affected, but the surcharge will hit high-value areas such as London and the South East hardest. A consultation will explore options for cash-poor homeowners to defer payment until sale or death.
2. Higher income tax on rental property from April 2027
- What’s changing?
From April 2027, income tax on rental property will rise by 2 percentage points:- Basic rate: 22%
- Higher rate: 42%
- Additional rate: 47%
- Why?
The government aims to address the disparity where landlords currently pay no National Insurance on rental income. - Likely impact:
- Reduced profitability for landlords
- Possible contraction in rental supply
- Upward pressure on rents in major cities
3. Stamp duty remains unchanged
Despite months of speculation, Stamp Duty Land Tax (SDLT) thresholds and rates remain the same. This provides short-term stability for buyers, especially in the mainstream market.
4. Other notable points
- No changes to main residence Capital Gains Tax relief, despite rumours.
- Tourist tax on overnight stays is planned, which may increase demand for short-term rentals.
What does this mean for you?
- Homeowners of high-value properties should plan for the new surcharge
- Landlords need to factor in higher tax rates from 2027, which could affect portfolio strategy and rental pricing. Broadly this doesn’t change the calculation of whether a buy-to-let property should be inside a company as dividend tax is also rising. Our calculations continue to indicate that a buy-to-let property within in a company is not favourable for most cases when considering taxes over the entire property ownership period (unless a company is cash rich and looking for investment rather than distribution).
- Buyers and sellers benefit from stability in Stamp Duty, but should watch for market adjustments as high-end properties respond to the new tax.