Budget 2025: What it means for the property market

After weeks of speculation and a steady stream of leaks, Chancellor Rachel Reeves has delivered her £26 billion tax-raising Budget. With much of the pre-Budget focus centred on potential measures targeting high-value homes, headline property-related proposals were unveiled.

First, an annual surcharge on homes worth more than £2 million from April 2028, which will be paid to central rather than local government and be called the High Value Council Tax Surcharge.

The Chancellor also announced a two-percentage point increase to rates of property income tax from April 2027, which is estimated to raise £500 million per year from 2028/29. For a deeper analysis of these measures and their likely market implications, Tom Bill, Knight Frank’s Head of UK Residential Research, provides further insight here.

After the Budget, we spoke with three of Knight Frank’s senior experts - James Cleland, Head of Country Sales; Stuart Bailey, Head of Super Prime London Sales; and Gary Hall, Head of Lettings - who shared their first impressions of the announcement, its impact on their markets, and their advice for clients navigating the months ahead.

What is your initial reaction to the Budget?

James: This Budget felt highly political, with measures clearly designed to keep backbenchers onside. That said, compared with some of the more dramatic policies rumoured in the run-up, the property market has actually escaped relatively lightly. The introduction of a fixed annual ‘mansion tax’, potentially with the option to defer payment, is far less punitive than a percentage-based levy would have been. Overall, it’s a largely benign Budget for the sector.

Stuart: Despite the noise and tension building ahead of the announcement, I think the Budget’s actual impact on the property market will be fairly limited. Yes, a ‘mansion tax’ is coming, and while every additional cost matters, in practice it’s manageable for the majority affected. What has been more damaging is the uncertainty in the lead-up to the Budget. Now that some clarity has returned, a lot of people are ready to move forward.

Gary: The proposed rise in income tax on property-related earnings will inevitably squeeze landlords’ margins further. The new ‘mansion tax’ adds another layer of cost, on top of ongoing pressures from legislation like the Renters’ Rights Act. So while the Budget wasn’t the major shock many feared, it will still add to the pressure on landlords and could influence decisions about whether to remain in the sector.

What does this mean for the property market in the short term?

Stuart: In just over 24 hours prior to the Budget, our London teams exchanged on £90m of property, far exceeding an average Tuesday. Speculation around anticipated tax changes has acted as a catalyst for the market in recent weeks, across all levels of the housing ladder. Looking ahead, I expect the market to settle back to where it was before the rumours began circulating. I don’t foresee any dramatic short-term impact on pricing now that the uncertainty has lifted.

James: Reflecting what Stuart has seen in London, our Country team has also experienced an exceptionally busy run-up to the Budget. Many people who were delaying decisions can now breathe a sigh of relief and get moving again. With that uncertainty removed, I wouldn’t be surprised to see momentum build quickly after Christmas, and January could prove to be an active month.

Gary: These changes will likely fuel the ongoing trend of landlords choosing to sell, increasing the number considering an exit from the rental market. The problem is that this only intensifies the already severe shortage of rental supply. With stock limited and tenant demand still strong, rents are likely to continue rising. For landlords who remain, this does create opportunities: although margins may be under pressure, there is the potential for yields to improve, and void periods are likely to fall as competition for available homes increases.

What advice do you have for those navigating their property portfolio post-Budget?

Gary: With these changes, and with the Renters’ Rights Act coming into force on 1 May 2026, it’s more important than ever for landlords to have the right agent and the right advice. Navigating new regulation is complex, and having an expert who can source reliable, high-quality tenants will be absolutely critical.

Stuart: Setting the speculation aside, the market today is broadly where it has been for the past six months. For active buyers, there’s a lot of opportunity out there, with far less noise now that the Budget uncertainty has passed.

James: For anyone who has been delaying plans while waiting for the Budget, there’s really no reason to continue holding back. The alternative is waiting for the next government, which is still years away, and exposing yourself to even more uncertainty. With interest rates lower and a well-priced market, it’s a sensible moment to consider buying.