Chancellor Unveils Mansion Tax and Higher Landlord Income Tax in Landmark Budget Shake-Up
The Chancellor, Rachel Reeves, has ignited major waves across the UK property market with the long-anticipated introduction of a Mansion Tax and an increase in landlord income tax, outlined during a lively Autumn Budget announcement in Parliament today.
In what is being described as one of the most consequential housing tax interventions in over a decade, Reeves confirmed a new ‘super council tax’ on homes valued above £2 million. The measure—commonly referred to as a mansion tax—is designed to ensure, according to HMRC, that “a £2 million mansion does not pay less tax than a family home.”
The new levy is expected to generate £400 million annually, while an additional 2% rise in tax on property, dividend, and savings income is projected to raise a further £2.1 billion. Together, these changes mark a decisive shift in the Government’s approach to taxation at the upper end of the housing market.
Beginning April 2028, properties valued over £2 million will be assigned new tax bands and charged an annual fee on top of existing Council Tax. Charges will also rise in line with inflation from 2029–30. The announcement adds further pressure to the prime London property market, already slowing due to recent reforms to non-dom tax status that have prompted many international buyers to rent rather than purchase.
Landlords Brace for More Pain
The Chancellor also confirmed a 2% increase in income tax for landlords, despite widespread industry concern following years of stricter regulation, reduced mortgage interest tax relief, and higher Stamp Duty surcharges.
Reeves argued that landlords must “pay their fair share,” stating that a landlord earning £25,000 from property pays £1,200 less tax than a tenant earning the same income—largely due to differing National Insurance arrangements. However, rather than reform NI, the Government will raise landlord income tax rates from April 2027 to:
- 22% (basic rate)
- 42% (higher rate)
- 47% (additional rate)
The move was met with immediate criticism. Conservative leader Kemi Badenoch warned that higher taxes on landlords will “push up rents and push landlords out of the market,” ultimately harming tenants.
Industry Reacts to Mansion Tax Shock
Colleen Babcock, Property Expert at Rightmove, cautioned that additional taxation risks “distorting the top end of the market” and triggering fall-throughs as high-value buyers reconsider longer-term implications. Homes priced close to the £2m threshold may soon be strategically listed at £1.99m to avoid deterring buyers.
Iain McKenzie, CEO of The Guild of Property Professionals, echoed concerns, noting the need for stability and warning that interventions at the premium end of the market must be approached “with caution.”
According to Lucian Cook, Head of Residential Research at Savills, although the tax has arrived at a lower level than feared, it may incentivise older homeowners to downsize and shift demand from prime London toward commuter regions. He also noted a disproportionate impact on second-home markets already burdened by surcharges and higher council tax.
Jason Tebb, President of OnTheMarket, highlighted that the tax will primarily hit London and the South East, where 80% of £2m-plus properties are located. He warned of a “ceiling effect” forming just below £2m, mirroring historic Stamp Duty distortions.
As the market absorbs today’s dramatic shift, agents, landlords, and homeowners across the UK will be closely watching how these reforms reshape pricing, supply, and buyer behaviour in the months ahead.
