How new UK housing taxes may start to reshape property returns

Arbuthnot Banking Group

The Autumn Budget 2025 introduced several changes that, while not dramatic in the short term, signal a clear shift in how residential property will be taxed and regulated in the years ahead.

A new council tax surcharge is set to apply to homes valued above £2 million from April 2028. This annual charge will increase in bands with property value and will sit on top of standard council tax. It will affect a small share of the market, but for those with significant exposure to prime residential property, it creates an ongoing cost that may start to influence portfolio decisions.

In parallel, rental income will be taxed more heavily from April 2027. All three income tax bands for property profits will rise by two percentage points. This pushes basic, higher and additional rates to roughly 22, 42 and 47 per cent. For landlords, especially those already managing narrow margins, the impact is direct. Net rental yields will shrink unless rents rise or costs are reduced. While there was some concern that rental income would also face new National Insurance charges, that step was not taken.

Despite pre-Budget speculation around a major overhaul or the introduction of an annualised property tax, the current system stays in place. This offers some stability for buyers and sellers in the near term, particularly in the mainstream market.

Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.

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