How property taxes could change at the Budget 2026

Could the Autumn Budget see further tax increases aimed at property owners and investors? Chancellor John Healey faces a major challenge: he needs to shore up the UK’s fiscal position while trying to avoid major spending cuts. 

Constrained by its 2024 manifesto pledge to avoid raising income tax, VAT and employee National Insurance, the Labour government will need to explore other sources of tax revenue.

There has been speculation that Healey could introduce some form of wealth tax. However, critics warn such a levy could damage Britain’s competitive position on the international stage and even cause some high-net-worth individuals and their families to leave the country. 

Property is arguably a more viable target. It’s more visible, easier to value and harder to move overseas than other assets. So, what changes might be announced in the Budget speech on 28 October?

Further ‘mansion tax’ details expected

The Labour government has already announced changes to property taxation since its election in 2024. In April 2028, the High Value Council Tax Surcharge is due to come into effect. Often referred to as the ‘mansion tax’, this will apply to owners of residential properties in England valued at £2 million or more. Scotland is also proposing two new high-value Council Tax bands for properties worth over £1 million from April 2028, subject to approval by the Scottish Parliament and primary legislation.

Some reports had suggested the Chancellor was considering increasing the revenue raised by reducing the qualifying threshold in England to £1.5 million, bringing more homes into the surcharge’s scope. But this now appears to have been ruled out. 

Instead, we expect the Budget to provide further details about how the scheme will be implemented and any exemptions that may apply.

New rules on holiday lets?

There have also been rumours that the government may decide to reclassify property used for holiday lettings as second homes. The consequences of such a move would be significant. Affected holiday lets could move from business rates into the Council Tax regime, potentially removing access to small business-rates reliefs.

 If this new rule is announced this would mean that holiday let property owners may be made to pay the higher rates of council tax on second homes that local authorities in England have been able to impose since April 2025.

Capital gains tax and property disposals

The capital gains tax (CGT) regime could be another area the government focuses on. While some early reports suggested the Chancellor may decide to bring CGT rates into line with income tax bands, this now appears to have been ruled out. 

We’re more likely to see targeted changes to rates and reliefs. These could affect investors, landlords and other second-home owners and could potentially influence the timing and economics of disposals. 

One potential option may be to revisit the CGT uplift that occurs upon death. Under the current rules, beneficiaries generally acquire inherited assets at their market value at the date of death rather than the deceased's original acquisition cost, meaning gains accrued during the deceased's lifetime are effectively removed from the CGT calculation.

However, we recommend a wait-and-see approach: clients should avoid rushing into transactions based on speculation around policy changes. 

A potential pause on inheritance tax changes

Recent years have seen an overhaul of the UK’s inheritance tax regime. Changes have included reforms to Agricultural Property Relief and Business Property Relief which took effect from 6 April 2026.

During the recent Conservative conference, the party’s leader Kemi Badenoch announced plans to scrap inheritance tax on family homes: an eye-catching proposal, but one which some experts have warned could deter people from downsizing. At this stage, it seems questionable that the government will make further significant alterations to the inheritance tax system in this Budget. 

Wholesale reforms of residential property taxation

During the current parliament, a number of Labour MPs have put forward proposals for fundamental reform of the way residential property is taxed in the UK. These plans would see stamp duty and council tax replaced with a single annual levy based on a home’s value. Prime Minister Andy Burnham has previously said that such changes were not currently on the table, but it’s possible the Chancellor will set out plans to reassess the current system over the longer term.

Keep up to date with our Budget coverage

On 28 October, our experts will be providing instant reaction to the key Budget measures on our dedicated hub and our LinkedIn page. And in the following weeks, we’ll have in-depth analysis and advice on how the Chancellor’s measures will affect your business.