Budget 2025

On 26 November 2025, Chancellor Rachel Reeves delivered her second Budget, and whilst many of the more dramatic rumours didn't materialise, there are still significant changes ahead for property investors, landlords, and savers.  

The Budget is projected to raise £26.1 billion by 2030 through a combination of measures, with property investors and higher earners bearing a significant burden.

Here's what you need to know and how it might affect your investment strategy going forwards.  

Property Tax Changes: What Landlords and Investors Need to Know

The "Mansion Tax" - High-Value Council Tax Surcharge

From April 2028, properties valued at over £2 million will be subject to a new annual High-Value Council Tax Surcharge. Here's how it works:

• £2 million - £2.5 million: £2,500 annual surcharge
• £2.5 million - £3.5 million: £5,000 annual surcharge
• £3.5 million - £5 million: £6,000 annual surcharge
• £5 million and above: £7,500 annual surcharge

The surcharge will be uprated by CPI inflation each year and paid alongside existing council tax. The Valuation Office will determine property values based on April 2026 prices. There will be consultation on options for support or deferral, which could be particularly important for asset-rich but cash-poor owners.

Impact

This measure is expected to raise £0.4 billion by 2029-30 and will affect less than 1% of properties. According to Savills, there are approximately 145,000 homes in the UK currently valued at £2 million or more, with 68% of these transactions occurring in Greater London. For most buy-to-let investors focusing on standard residential units in high-yield areas, this won't directly impact your portfolio. However, it does signal the government's willingness to target property wealth.  


Rental Income Tax Increase

This is the change that will affect most landlords. From April 2027, property income tax rates will increase by 2%:

• Basic rate: From 20% to 22%
• Higher rate: From 40% to 42%
• Additional rate: From 45% to 47%

The Chancellor justified this by pointing out that "a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenants with the same salary, because no National Insurance is charged on property, dividend or savings income".

What This Means For Your Returns

For a higher-rate taxpayer with £50,000 in rental profit, this equates to an additional £1,000 in annual tax. Future yield calculations will have to factor this in.  


Stamp Duty Unchanged

Following the significant increases in the 2024 Budget (when the additional properties surcharge rose from 3% to 5%), many feared further hikes. The decision to leave Stamp Duty Land Tax rates untouched provides a much-needed relief If you've been waiting to see what the Budget would bring before investing, this is your green light.  


Capital Gains Tax on Property: No Changes

There were no announced changes to CGT rates on property disposals. The rates remain at 18% for basic rate taxpayers and 24% for higher rate taxpayers, as set in the October 2024 Budget.  Principal Private Residence relief also remains unchanged—your main home continues to be exempt from CGT.  


ISAs and Savings: Pushing Investors Towards Investments

Cash ISA Allowance Cut

From April 2027, the cash ISA annual allowance will be cut from £20,000 to £12,000 for those aged under 65. The remaining £8,000 must be invested in stocks and shares ISAs, Innovative Finance ISAs (IFISAs), or Lifetime ISAs.

Key Exception

If you're aged 65 or over, you retain the full £20,000 cash ISA allowance—a rare age-based exemption in our tax system. The Chancellor explained that over half of the ISA market, including some of the major providers have signed up to provide an online hub to help people invest in Britain.

What This Means For You

The government is clearly pushing people away from pure cash savings and towards investment.  If you're under 65 and currently maximising your cash ISA allowance, you've got until April 2027 to adjust your strategy. This could be an opportunity to explore Innovative Finance ISAs, which allow you to invest in peer-to-peer lending and property crowdfunding opportunities whilst maintaining tax efficiency.  

Savings Income Tax Increase

The basic, higher, and additional rates on savings income will increase by 2 percentage points from April 2027. This affects interest earned on savings accounts that exceeds your personal savings allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers, and £0 for additional rate taxpayers). Combined with the cash ISA restrictions, this reinforces the government's message: they want your money working harder in investments, not sitting in savings accounts.  


Pensions: Salary Sacrifice Capped

£2,000 Annual Cap on Salary Sacrifice

From April 2029, only the first £2,000 of pension contributions made via salary sacrifice will be exempt from National Insurance Contributions (NICs) for both employees and employers. The Chancellor stated that "tax breaks on salary sacrifice pension schemes are forecast to cost £8 billion by 2030, with the greatest benefit going to higher earners".

Impact

This primarily affects higher earners who currently use salary sacrifice to reduce both income tax and NICs. If you're contributing more than £2,000 annually through salary sacrifice, you have until 2029 to adjust your pension strategy. Standard pension contributions outside of salary sacrifice schemes are not affected by this cap.


Tax-Free Lump Sum Safe—For Now

Despite widespread speculation and concerns that the 25% tax-free pension lump sum (currently capped at £268,275) would be reduced or scrapped, it remains untouched. This is welcome news for those approaching retirement.  


Investment Incentives

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT)

To encourage investment in UK businesses, the government announced from April 2026:

• Investment limits doubling: The annual limits for company size eligible for EIS and VCT reliefs will double, making it easier for growing businesses to access this funding
• VCT income tax relief reducing: The rate will drop from 30% to 20%, though this still provides valuable tax relief for investors willing to back UK companies

These schemes can offer significant tax benefits for those looking to diversify their investment portfolio, including income tax relief, CGT exemption on gains, and loss relief.  


Employee Ownership Trusts

Relief Reduced

Capital gains tax relief on qualifying disposals to Employee Ownership Trusts has been reduced from 100% to 50%, effective immediately from 26 November 2025. This affects business owners considering employee ownership as an exit strategy.  

Dividend Income: Higher Taxes Ahead

From April 2027, dividend income tax rates will increase by 2%:

• Basic rate: From 8.75% to 10.75%
• Higher rate: From 33.75% to 35.75%
• Additional rate: From 39.35% to 41.35%

This affects those with significant dividend income from shares held outside ISAs or pensions. The dividend allowance (currently £500 for most taxpayers) remains unchanged, but any dividends above this threshold will face the higher rates.


Planning Tip

Shares held within ISAs remain completely tax-free from dividend tax, capital gains tax, and income tax. This makes ISA wrappers even more valuable for equity investors.  


Capital Gains Tax: Rates Unchanged

There were no changes to capital gains tax rates announced in this Budget. The rates remain at:

• Basic rate taxpayers: 18% (or 10% for disposals qualifying for Business Asset Disposal Relief until April 2026, then 14%, rising to 18% from April 2027)
• Higher rate taxpayers: 24%

Principal Private Residence relief continues unchanged—your main home remains exempt from CGT regardless of its value.  


Income Tax: The "Stealth Tax" Extended Three-Year Threshold Freeze

The personal tax allowances will be frozen for another three years until April 2031:

• Personal allowance: £12,570
• Higher rate threshold: £50,270
• Additional rate threshold: £125,140

This freeze is the single biggest revenue raiser in the Budget, projected to generate £7.8 billion in 2029/30 and £12.4 billion in 2030/31.


Why This Matters

As wages rise with inflation whilst thresholds stay frozen, more people are pulled into higher tax brackets—a phenomenon known as "fiscal drag". If you receive a pay rise or promotion that pushes you over one of these thresholds, you'll pay a higher rate of tax on that portion of income. With wage growth expected to continue, this "stealth tax" will affect millions of taxpayers who never considered themselves higher earners.  


Other Key Measures

Two-Child Benefit Cap Abolished

The two-child benefit cap will be scrapped, at a projected cost of up to £3.5 billion by the end of this Parliament. This marks one of the most significant welfare changes in nearly a decade and will benefit over 1.5 million children currently affected.  

Electric Vehicle Mileage Tax

From April 2028, a new mileage-based charge will apply: £0.03 per mile for battery electric cars and £0.0015 per mile for plug-in hybrid cars, with rates increasing annually with CPI. This is part of the government's strategy to replace falling fuel duty revenues as more drivers switch to electric vehicles.      

National Living Wage Increase

The national living wage will rise by 4.1% to £12.71 per hour from 1 April 2026, worth around £900 annually to 2.4 million full-time workers. Whilst this is positive for workers, employers and landlords should factor increased labour costs into their budgets.  


What This Means For Property Investors

The dust is now settling on the Budget, and whilst there are additional costs coming, the fundamentals of property investment remain strong. Here are a few thoughts for your consideration:  

For Buy-to-Let Landlords Short-Term Actions

• Factor the 2% property income tax increase into your 2027-28 projections
• Review your portfolio mix—properties in high-growth rental areas may be better placed to absorb tax increases through rental growth
• Consider whether incorporating your portfolio makes sense for your situation (corporate structures aren't affected by the personal tax rate increases)

Long-Term Strategy:

• Focus on high-yield areas where rental growth outpaces the South East average
• Cities like Manchester, Leeds, Liverpool, and Birmingham continue to offer strong foundations: growing populations, regeneration, and rental demand from young professionals
• The Stamp Duty freeze means transaction costs are stable—if you've been waiting, you can now act

 
Property Crowdfunding and P2P Lending: ISA Changes Create Opportunities

• Innovative Finance ISAs (IFISAs) will become more attractive as cash ISA limits shrink
• Property-backed lending through peer to peer lending and bonds qualify for IFISA treatment
• You can still invest up to £20,000 annually tax-efficiently—£12,000 in cash and £8,000 in stocks and shares or IFISAs

What Stays The Same

• Returns from property crowdfunding and P2P lending remain attractive when compared to other options
• IFISA wrappers protect you from the incoming tax rises on savings and property income
• You can still build a diversified portfolio of property-backed investments

For All Investors

Pension Planning

• You may wish to maximise contributions before 2029 if you're a higher earner using salary sacrifice
• The 25% tax-free lump sum survives another Budget—but don't delay retirement planning on the assumption it'll always be there
• Consider standard pension contributions (not affected by the £2,000 cap) if you're a higher rate taxpayer

ISA Planning

• If you're under 65, start moving towards investment ISAs before April 2027
• Consider IFISA options for property-backed returns with tax efficiency
• Over 65 should take advantage of their full £20,000 cash ISA allowance if that suits your risk profile

Tax Efficiency

• With property, dividend, and savings income all facing 2 percentage point increases, ISA wrappers become even more valuable
• EIS and VCT investments offer generous tax relief for those comfortable with higher risk

What Didn't Happen

It's worth noting what the Budget didn't include, as many feared measures were ultimately not announced:

• No wealth tax: Despite calls from some quarters, no annual levy on high-net-worth individuals was introduced
• No exit tax: The UK will not charge CGT on gains when individuals leave the UK
• No restrictions on main home relief: Your principal residence remains fully exempt from CGT regardless of value
• No inheritance tax increases: Rates and thresholds remain unchanged (though the reforms announced in the 2024 Budget, including bringing pensions into IHT from 2027, are still proceeding)
• No employer NICs on LLP partners: Partnership profits remain free from National Insurance
• Corporation tax unchanged: Remains at 25%, the lowest in the G7

Overall Tax Burden

The Office for Budget Responsibility confirmed the overall tax burden will reach 38.3% of GDP by 2031—a record high for the UK. However, the government has avoided a return to austerity, instead choosing to raise revenues whilst maintaining public service investment.


The Bottom Line

The Autumn Budget 2025 brings a mix of challenges and further clarity for investors. Yes, there are tax increases coming—particularly on property and investment income—but the fundamentals remain:

• Property investment still works: High-yield areas with strong rental growth can absorb the 2% tax increase. The Stamp Duty freeze provides stability, and the housing shortage means demand continues to outstrip supply.
• Tax-efficient wrappers become more valuable: With ISAs, IFISAs, and pensions protecting you from the tax rises, maximising tax-efficient investment becomes even more important.
• The wait-and-see period is over: Many investors have been on the side-lines waiting for clarity. The Budget provides that clarity—now is the time to make informed decisions rather than speculate about what might happen next.

As we've seen through multiple Budgets and economic cycles, property investment remains a cornerstone of wealth building in the UK. With the right strategy, knowledge, and focus, investors can continue to build wealth. The key is to stay informed, adapt your strategy, and work with experienced teams.   


NOTE

This information is based on the Budget announcements of 26 November 2025 and our understanding of current tax legislation. Tax rules can change, and their application depends on individual circumstances. You should always seek professional financial and tax advice before making investment decisions.

Property crowdfunding and peer-to-peer lending are high-risk investments. You could lose some or all of the money you invest. Please read our risk statement before investing.