Budget 2025: What It Really Means For Homeowners, Landlords and Tenants
Budget 2025 hits wealth, property income and higher value homes, with little relief for renters. This guide explains in plain English what the changes mean if you own, let or rent a home, who pays more, and what it could mean for prices, rents and mortgages into 2026.
Budget 2025: What it means for homeowners, landlords and tenants.
The Chancellor has delivered the 2025 Budget and, as usual, the property sector has been used to plug a big hole in the public finances. The Office for Budget Responsibility (OBR) reckons the package raises roughly £26 billion a year by 2029/30, heavily leaning on frozen tax thresholds and extra taxes on wealth, property income and dividends.
Here is what actually matters if you own a home, let a property or rent.
1. Big picture: the headline property changes
The main housing-related measures that came out of the speech and the supporting documents are:
• A new “mansion tax” style council tax surcharge on homes worth over £2 million from April 2028
• Higher tax on rental (property) income from April 2027
• Dividend and savings tax rates up, which hits landlords using company structures
• No change to Stamp Duty and no uplift to Local Housing Allowance (LHA)
• Energy bill ECO surcharge scrapped, cutting average households’ bills by about £150 a year
• Income tax thresholds frozen for longer from 2028, dragging more people into higher rates over time Let’s break that down for each group.
2. Homeowners
2.1 High value council tax surcharge (“mansion tax”)
From April 2028 there will be a new High Value Council Tax surcharge on homes valued above £2 million:
• Properties over £2 million will pay an extra £2,500 a year
• Properties over £5 million will pay £7,500 a year
• It sits on top of normal council tax and rises each year with inflation
Who is affected?
Realistically, this hits the top end of the market: prime London, certain parts of the South East and country house stock.
If your home is worth, say, £500,000 or £750,000, you are nowhere near this.
How much will people feel it?
• An extra £2,500 a year is around £200 a month.
• £7,500 a year is around £625 a month.
So it is not a rounding error. It will encourage some older, equity-rich owners to sell larger homes they do not really need, especially those on fixed incomes who do not want another recurring bill they cannot control.
2.2 No change to Stamp Duty
Despite a lot of noise before the Budget, there were no changes to residential Stamp Duty for homebuyers.
The new measures are mostly around income, council tax and wealth taxes, not residential SDLT.
What this means in practice
• If you were hoping for a new Stamp Duty holiday, it did not happen.
• If you were worrying about a fresh SDLT hike on standard purchases, that did not happen either.
So for most buyers and sellers, the up-front tax picture is unchanged.
2.3 Energy bills:
ECO surcharge scrapped The government is scrapping the Conservatives’ ECO scheme surcharge on energy bills.
This should save the average household around £150 a year.
What it means
• Expect a modest fall in your annual energy bill, assuming suppliers pass it on.
• The OBR thinks this and other cost-of-living measures lower next year’s inflation by around 0.4 percentage points, which increases pressure on the Bank of England to start cutting base rates sooner.
Lower rates are good news for future mortgage costs.
2.4 Frozen income tax thresholds
The Chancellor is freezing income tax thresholds for an extra three years from 2028/29 to 2030/31.
In real life terms
• Pay rises between now and early 2030s will push more of your income into higher tax bands, even if the headline rates are unchanged.
• It hurts anyone with rising earnings, including dual-income homeowner households paying mortgages.
The impact will vary hugely by salary, but the direction is simple: more tax drift, less takehome over time.
3. Landlords Landlords got the usual treatment: “we value you, but here is the bill.”
3.1 Higher tax on rental income from April 2027
The Budget confirms a 2 percentage point increase in the tax rates applied to property income from April 2027.
The new rates will be:
• 22% basic rate (up from 20%)
• 42% higher rate (up from 40%)
• 47% additional rate (up from 45%)
This is on property income, not your PAYE salary, but for a typical mortgaged landlord it all flows into the same bottom line.
Rough numbers Take a landlord with £15,000 net rental profit a year (after allowable expenses, before tax).
Tax bill on that slice:
• At 20%: £3,000
• At 22%: £3,300
So that is £300 more tax per year per £15k of property income. Scale that up for bigger portfolios and it bites.
3.2 Dividend tax up: company landlords also hit On top of that, dividend tax rates go up by 2 percentage points too:
• Basic rate dividend tax rises to 10.75%
• Higher rate to 35.75%
So if you hold your rentals through a company and pay yourself via dividends, you get hit on the way out there as well.
3.3 No National Insurance on rental profits (for now)
One small mercy: the widely trailed idea of charging National Insurance on rental income did not appear in the final Budget. Landlord groups are already saying that while NI was avoided, the increased property income tax still takes a sizable bite out of landlord profits. So the nightmare scenario has been watered down, but not exactly replaced with a hug.
3.4 Knock-on for rents and supply
Landlord bodies and lender commentators are fairly blunt:
• They expect the higher tax on property income to push some landlords to sell.
• Lower returns mean fewer rental homes available over time.
• If supply falls while demand stays strong, rents drift higher, not lower.
The successive erosion of private landlord returns is likely to reduce rental supply in the long run, and this risks a steady long-term rise in rents if demand outstrips supply. The higher property income tax is expected to trim house price growth slightly from 2028, but only by about 0.1% per year. It hurts landlord margins more than it moves prices.
4. Tenants
Tenants, as usual, are stuck in the crossfire between government and landlords.
4.1 No increase to Local Housing Allowance Despite lobbying, the Budget did not unfreeze Local Housing Allowance (LHA). What that means
• Benefit-dependent tenants still have their housing support pegged to outdated rent levels.
• If landlords’ costs go up and LHA stays frozen, the gap between rent due and benefit received just widens. Expect more affordability pressure at the lower end of the market and more people relying on discretionary top-ups, guarantors or family support.
4.2 Rent pressures from landlord tax rises Many landlords will try to raise rents to cover higher tax and, if that fails, some will sell up. It is basic supply and demand:
• Higher landlord taxes
• Some landlords exit or stop expanding
• Fewer homes to rent
• Strong demand from tenants stays
• Rents trend higher over the next few years, not lower
This Budget does nothing significant to change that equation.
4.3 Cost of living and benefit changes
There are some changes that indirectly help tenants:
• The two-child benefit cap is being removed from April 2026, which particularly helps larger low-income families.
• Benefits are being uprated in line with inflation.
• The ECO energy bill surcharge is scrapped, knocking an estimated £150 off the average household bill. Those measures help with general affordability, but they do not address the core issue of rents rising faster than incomes in many areas.
5. What does this Budget mean for the housing market in early 2026?
The OBR and various housing analysts have updated their forecasts alongside the Budget.
5.1 House prices The OBR’s latest numbers suggest average UK house prices are forecast to rise from about £260,000 in 2024 to just under £305,000 in 2030. That implies growth of just under 3% in 2025 and around 2.5% a year from 2026 onwards. Some major agents have also projected around 4% growth in 2026, with cumulative gains of roughly 24–25% by 2029, assuming interest rates ease and incomes grow.
So what about Q1 2026 specifically?
The OBR does not publish a neat “Q1 2026 only” house price number in the headline documents, but the pattern is clear:
• No crash is forecast.
• The expectation is low single-digit annual growth, not fireworks.
• Higher property income tax from 2027 nudges prices down only a fraction over the medium term.
In plain English: the Budget is not seen as a trigger for a price collapse. The bigger drivers are still interest rates, wages and general confidence, not this set of tax tweaks.
5.2 Transactions
The OBR expects transactions in 2025 to be a bit volatile, but to rise from just under 1.1 million in 2024 to about 1.3 million by 2029. That is still around 155,000 fewer per year than they were forecasting back in March, mainly due to higher Stamp Duty from past changes, slightly higher long-term mortgage rates and an ageing population moving less often. So we are still in a subdued but functioning market, not frozen.
5.3 Mortgage rates
The OBR and most forecasters point to inflation easing a bit faster thanks to cost-of-living measures, including the energy bill tweak. That puts more pressure on the Bank of England to start cutting the base rate through 2026. Most forecasters now expect gradual falls in mortgage rates from 2026, not a return to ultracheap 1–2% deals, but a shift away from the high-4s and low-5s people have been fighting with recently.
6. So who are the winners and losers?
Homeowners If your property is under £2 million:
• No new property tax shock.
• Potentially slightly lower energy bills.
• Gradual relief on mortgage rates if the inflation story plays out.
If your property is over £2 million:
• Factor an extra £2,500–£7,500 a year into the budget from 2028.
Landlords
• Your tax on rental income is going up by 2 percentage points from April 2027.
• If you operate through a company, your dividend tax is going up too.
• Margins tighten further, especially with higher finance costs and the Renters’ Rights Act bedding in.
Tenants
• No help via LHA, despite rising rents.
• Some help via benefit changes and slightly lower energy bills.
• But the structural issue remains: fewer landlords over time usually means higher rents and more competition for each home.
Property is still a solid long-term asset, but the rules of the game keep shifting. Higher taxes on landlords, extra council tax for high value homes and a lack of help for renters will shape how people buy, sell and let over the next few years.
If you are thinking about moving, renting out a property or reviewing your portfolio and want to understand how these changes might affect your plans, get in touch. I am happy to talk through your situation, look at the numbers with you and help you make a clear plan in light of the new Budget.