Budget 2025 Property Tax guide
The 2025 Budget introduces major property tax reforms, including a council tax surcharge on homes over £2 million, higher tax on rental income, and implications for capital gains and inheritance planning. Alexander & Co examines the impact for homeowners, landlords, and investors, particularly in London and the South East.
High-Value Council Tax Surcharge (HVCTS)
Homes valued above £2 million will face a new annual surcharge from April 2028, based on 2026 valuations. The levy applies to owners, including second homes and properties held in companies or trusts. London and the South East are most affected.
Surcharge bands:
- £2–2.5m: £2,500/year
- £2.5–5m: £5,000/year
- £5m+: £7,500/year
This cost may influence ownership structures, downsizing, or sales. For guidance, see Property Tax Planning.
Taxation of Rental and Property Income
From April 2027, rental income will face higher tax rates than employment income. This reduces net returns for landlords and investors, affecting borrowing, rental pricing, and portfolio strategy. Portfolio owners should consider Landlord Tax Advisory for tailored strategies.
Capital Gains and Stamp Duty Considerations
Higher capital gains tax may apply on property sales, while Stamp Duty thresholds remain unchanged. Combined with HVCTS and income taxation, ownership costs increase. Property owners should review estate planning, gifting, and trusts. See our trust guidance and the trust services we offer.
2025 Budget property taxes – Case Study Scenarios
| Profile | Likely Outcome |
|---|---|
| Owner-occupier, £2.3m home | From April 2028 ,a £2,500 surcharge; cash-flow planning needed |
| London landlord, £3.5m portfolio (held personally, each property less than £2m) | From April 2027, reduced yields; may adjust rents or sell |
| Owner occupier of a £6m property | From April 2028, a £7,500 surcharge; review wealth and estate planning |
| Family trust holding a £2.1m home | From April 2028, a £2,500 surcharge applies regardless of occupation; trust review advised |
Recommended Actions for Property Owners following Budget 2025 Property Tax Changes
- Review ownership models: trusts, companies, or family investment companies may need adjustment
- Assess cash flow: plan for surcharge and higher tax on property income
- Plan disposals and succession: mitigate capital gains and inheritance exposure
- Consider a company structure: if you hold investment/buy-to-let property personally, consider if a limited company structure will be beneficial from a tax perspective
- Stress-test portfolios: landlords should review rents, mortgages, and long-term returns in light of tax rises
Contact Alexander & Co following Budget 2025 for Property Tax Advice
For further advice on how these tax changes could affect you or your business, or any other tax related queries, please contact Alexander and Co. we are an ICAEW regulated firm:
Phone: 0161 832 4841 or 0207 167 7220
Email: info@alexander.co.uk
Website: www.alexander.co.uk
You can also use the contact forms on this page. Our offices are conveniently located in Manchester and London, serving clients across the UK.
FAQs
Q1: What is the High-Value Council Tax Surcharge (HVCTS)?
A1: The HVCTS is an annual tax on homes over £2 million, starting in April 2028, with charges between £2,500 and £7,500 per year based on property value.
Q2: Who is liable for the surcharge?
A2: Owners of high-value homes, including second-home owners, landlords, and properties held in trusts or companies.
Q3: Budget 2025 property tax – how will landlords be affected?
A3: From April 2027, rental income faces higher taxation, reducing net yields and potentially impacting portfolio strategy and borrowing.
Q4: Budget 2025 property tax – Are Stamp Duty thresholds changing?
A4: No, Stamp Duty thresholds remain the same, but total ownership costs will rise due to HVCTS and increased property income taxation.
Q5: What steps should property owners take now?
A5: Review ownership structures, assess cash flow for new taxes, plan for capital gains and inheritance, and stress-test portfolios for long-term sustainability.
Related Articles
- Tax Services: Detailed advisory services for homeowners, landlords, and investors on all aspects of property taxation.
- Succession Planning: Guidance on structuring assets, trusts, and succession planning in light of changing property taxes.
- Inheritance Tax Advisory: Expert advice for landlords and property investors on inheritance.
- Capital Gains Tax Planning: Strategies for mitigating CGT on property disposals and high-value assets.
