After a softer-than-anticipated Autumn Budget, the property market seems poised for a strong start to 2026.
When Chancellor Rachel Reeves made her pre-Budget speech, warning of the need for ‘necessary choices’ ahead, there was a wave of speculation over whether this signalled an increase in Income Tax, National Insurance, or potentially even both.
In the wake of significant backlash and uncertainty, the Chancellor quickly climbed down from any plans to increase either Income Tax or National Insurance.
However, despite this assurance, the implication was that the Autumn Budget would contain hard choices that would have a significant impact on household incomes.
The stern warning from the Chancellor of ‘necessary choices’ naturally sent waves of pessimism through the UK economy, including within the property market.
Rumours of tax rises, potential further changes to Stamp Duty Land Tax (SDLT), and increased Capital Gains Tax (CGT), all fuelled fears of harder trading conditions being ahead for property.
Thankfully, a softer-than-expected budget for the property market means that these fears have been eased ahead of the expected ‘Boxing Day Boom’ in homebuyer activity.
This was in part due to the announcement from the Office for Budget Responsibility (OBR) that the UK economy will expand by 1.5% during 2025, up from its previous prediction of just 1%.
While this is welcome news, the OBR has also lowered its UK growth forecast for next year.
However, if these uncertain times have taught us anything, it’s that a lot can happen in a short time.
So in the shorter term, a softer than expected budget at the very least, but what impact could this have on the UK property market?
Arguably, the most universal impact on household incomes comes from the announcement that the current Income Tax and National Insurance thresholds will be held for a further three years.
This will mean that more people will find themselves paying tax for the first time, or being pulled into higher tax bands through the process of ‘fiscal drag.’
Although not an immediate or direct tax on the cost of buying a home, the threshold freeze will have an impact on what some buyers can afford when moving home in the future.
One of the rumoured policies which was eventually presented in the Autumn Budget was the so-called ‘Mansion Tax.’
The Chancellor has announced a new surcharge to be applied to all properties in England valued at £2 million or more from April 2028.
This will be paid in addition to the current normal rates of Council Tax, although it is expected that less than 1% of homes are expected to be above the £2 million threshold.
The Valuation Office will conduct a ‘targeted valuation exercise’ to identify which properties will be impacted by the surcharge, with those valued at £2 million or more being subject to additional banded tax payments.
The bands for the new surcharge are:
According to the government, the surcharge will rise with the Consumer Price Index (CPI) each year, while property revaluations will take place every 5 years.
An initial consultation will take place regarding the surcharge in 2026, so homeowners will be keeping a close eye on future developments to see if the charges eventually roll out as outlined.
The Budget contained a raft of policies targeting what the government identifies as a gap between tax paid on work and tax paid on ‘passive income’, or assets.
Changes include increased rates for dividend income, property, and saving income.
According to HM Treasury (1):
There had been some speculation that the Budget would introduce National Insurance payments for rent income, but this was excluded from the Chancellor’s announcements.
Likewise, landlords will benefit from a hold on current rates of Stamp Duty Land Tax (SDLT); however, the introduction of separate tax rates for property income will mean that rental property owners will need to reevaluate their investment strategies.
Increased pressure from rising property income tax and the newly instated Renter’s Rights Act could cause more landlords to exit the market.
While some have suggested that this could cause a rental crisis, we’ve observed a shift in the rental market, rather than a migration.
When landlords decide to exit the market, we’ve seen fresh interest from other savvy investors (and first-time buyers) who are keen to take advantage of the available stock at auction – particularly in Manchester and the North West.
Although the Chancellor’s new property income tax will inevitably have landlords taking a second look at their rental figures, the impact and extent to which the new rates cause an exodus from the market will heavily depend on individual circumstances.
The property market has shown remarkable resilience throughout 2025, despite continuing economic and policy pressures.
Although house sale volumes have lowered since the 2021-2022 rush, key performance indicators such as house prices, buyer demand and sales have remained stable in recent years, even in the face of higher interest rates.
This has been tempered by regional differences, with the North emerging as something of a ‘property powerhouse’, but overall, the property market has avoided the crash that some predicted.
The Chancellor’s latest Budget announcement has introduced little to impact this momentum, which will come as a great relief to both buyers and sellers during the New Year.
A softer-than-expected budget should instil property buyers and sellers with confidence just in time for the Boxing Day property rush, when buyers take to the market to begin the search for their next home.
Buyer activity almost doubles between Christmas Day and Boxing Day* as buyers take to the market, so for sellers looking to sell their property in 2026, now is the time to act.
With over 40 years of experience in helping people buy and sell homes across Tameside, Stockport, Cheshire, and Greater Manchester, Edward Mellor is the trusted name in property sales.
Our friendly property experts will help you start your property journey with an accurate property valuation, enabling you to understand the true value of your home and allowing us to find you the right buyer.
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*Google Analytics: Edward Mellor visitors from Christmas Day to Boxing Day 2024
(1) – HM Treasury: Changes to tax rates for property, savings & dividend income, November 2025
