The lead-up to this year’s Autumn Budget created significant uncertainty in the property sector, with months of endless speculation over potential changes weighing heavily on confidence and impacting the wider economy.
The Chancellor’s announcements introduced a raft of changes including further unwelcome measures for individual property owners with an increase in property income tax rates and a new “mansion” tax for high value properties.
While there was some relief that no major surprises emerged, the Budget offered little positive news to support property owners or stimulate the market. There was no significant reform to Stamp Duty Land Tax (SDLT) or capital gains tax. Business rates have been reformed, which will add further pressure for tenants, although some retail, hospitality and leisure businesses will benefit from a lower multiplier.
We will wait to see how these measures impact the property sector and whether the market sees some degree of stability or continues to face uncertainty amid the prospect of further tax rises again next year.
We have set out below a summary of the main changes impacting our property clients.
Property Income Tax rate increase
From April 2027, the Government will introduce separate tax rates for property income for individuals, increasing current tax rates by 2% to the following:
- 22% for basic rate taxpayers
- 42% for higher rate taxpayers
- 47% for additional rate taxpayers.
Finance cost relief will continue to be available at the property income basic rate (at 22% from April 2027) for residential property, with no such restriction on commercial property.
Corporation tax rates on rental profits remain unchanged, with the Government committed to capping the main rate of corporation tax at 25% for the duration of the current Parliament.
Dividend Tax rates
From April 2026, many individual shareholders, excluding additional rate taxpayers, will be impacted by an increase in dividend tax rates. The new dividend tax rates will be:
- Basic rate: 10.75% (up from 8.75%)
- Higher rate: 35.75% (up from 33.75%)
- Additional rate: 39.35% (unchanged)
Carried interest rates
As announced previously, carried interest will be taxed under the income tax regime from April 2026 with a multiplier of 72.5% applied to any qualifying interest brought within the charge.
High Value Council Tax Surcharge (“Mansion Tax”)
From April 2028, homeowners of properties valued at £2 million or more will be liable to a new annual High Value Council Tax Surcharge applied across the four price bands set out below:
Threshold (£) Rate (£)
£2m–£2.5m £2,500
£2.5m–£3.5m £3,500
£3.5m–£5m £5,000
Above £5m £7,500
The new surcharge will be collected alongside the existing Council Tax for the property and will increase annually in line with CPI inflation from 2029-30 onwards.
Capital Allowances
The Government has maintained full expensing for companies, allowing 100% relief on qualifying expenditure for most new plant and machinery (excluding cars), alongside a first-year allowance (FYA) of 50% for integral features and long-life assets. The limit for the Allowance Investment Allowance (AIA) will remain at £1m.
However, the main rate pool writing-down allowance will be reduced from 18% to 14% from April 2026. This will fund the introduction from 1 January 2026 of a new permanent FYA of 40% for all businesses on main rate assets including most assets for leasing and unincorporated businesses. Cars, second-hand assets and assets for leasing overseas will not be eligible.
Business Rates Reform
From April 2026, business rates will vary by property use and rateable value. Retail, Hospitality and Leisure (RHL) properties will benefit from a lower multiplier, set 5p below national rates, while larger properties and warehouses will face higher rates.
The proposed multipliers are, as follows:
Rateable Value RHL Other
£0–£50,999 38.2p 43.2p
£51,000–£499,999 43p 48p
Over £499,999 50.8p 50.8p
The Government will provide support through transitional and small business relief schemes to cap rates increases for eligible properties and businesses.
The Government will also consult on moving from the current ‘slab’ system to a ‘slice’ system, applying multipliers progressively like income tax.
Transfer pricing
Following two consultations, the legislation for transfer pricing, permanent establishments and diverted profits tax will be updated from 1 January 2026. This will include the following changes:
- Exempting most UK-to-UK transactions from the transfer pricing rules;
- Separating implicit support for financing transactions from explicit guarantees; and
- Widening the scope of the rules to include parties under coordinated management.
The proposed restriction of the transfer pricing exemption for small and medium-sized businesses has been ruled out, which will be welcome news for such businesses.
From 1 January 2027, the Government will introduce a new International Controlled Transactions Schedule (ICTS) for UK businesses within the scope of the transfer pricing rules and foreign business with a UK permanent establishment. This information will be used by HMRC for automated risk profiling to improve compliance by businesses and increase tax collection.
Other Measures
Below are a summary of some additional measures that may also be relevant for businesses in the property sector and property owners:
National Minimum Wage (NMW)
The Government has announced increases to the National Living Wage (NLW) and NMW from 1 April 2026, as follows:
- NLW; £12.71 per hour (increased by 4.1%
- 18 – 20 year olds: £10.85 (increased by 8.5%
- 16 – 17 year olds and apprentices: £8.00 (increased by 6.0%)
Pension Salary Sacrifice
From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from employee and employer NICs.
Construction Industry Scheme (CIS)
HMRC powers will be strengthened to tackle fraud within CIS from April 2026 where it can be shown that a business knew or should have known a transaction was connected with fraudulent tax evasion. The measures will provide for immediate cancellation of the business’ Gross Payment Status (GPS), assessment for the related tax loss on the business and penalties of up to 30% on the business, or its officers.
UK Listing Relief
An exemption from the 0.5% Stamp Duty Reserve Tax (SDRT) charge will apply on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market. The exemption will apply for a three-year period from the listing of the company’s shares.
Corporate Interest Restriction (CIR)
HMRC will simplify administration for companies appointing a CIR reporting company by removing the requirement for the appointment to be made by notice to HMRC.
ATED – Out-of-time claims for relief
New legislation will confirm that Annual Tax on Enveloped Dwellings (ATED) relief continues to apply to companies holding property for qualifying commercial purposes, even when returns are filed late. However, late filing penalties may still apply.
Enforcement and tax collection
The Government has announced various tax compliance initiatives to invest in HMRC to reduce tax debt, modernise systems through digitalisation and data-driven tools, and strengthen partnerships with private debt collection agencies.
The UK will also join a new agreement for automatic exchange of real estate information from 2029/2030 to combat tax evasion.
Budget still causing a headache? Click here to read our full Budget breakdown, or reach out to Nick Jordan, Property Tax Partner, at njordan@haysmac.com with any questions.
