What Does The 2025 Budget Mean For The Property Sector?

The Bad – Increased Property Taxes And Stamp Duty Letdowns

The most standout changes for our industry are, of course, the ‘mansion’ surcharge on all homes valued at over £2,000,000, and increased property income taxes for landlords. In addition to redefining a ‘mansion’ to include a swathe of relatively small properties in Central London and other prime locations, the new surcharge also increases the tax burden on High Net Worth investors.

We also have concerns around the implementation of this surcharge, and the potential knock-on impacts it could have on completion speed for property transactions. Because the proposed surcharge is a levy with fixed bands and not a marginal tax, there is now an additional factor for valuers to consider, and a potential incentive for buyers to dispute valuations close to a threshold. This in turn could cause delays in transactions.

Although the mansion tax is small in terms of the amounts charged, it is also combined with an increase of two percentage points in property income tax, along with an increased dividend tax. This is likely the biggest impact on the property sector, and will mean higher running costs and tighter margins, especially on high-value homes. Although good opportunities in the lower and mid-market should remain, many landlords who already struggled with tight margins and low yields will be forced to either cut costs or increase rents to stay in profit.

In addition, rumours of a cut in Stamp Duty were unfortunately not acted upon, removing what could’ve been a helpful stimulant for transactions, especially in the short- and medium-term. This maintains friction in the market for all parties, including property investors, landlords, SME developers, and potential buyers.

The Good – Increased Public Capital Commitment And Further Planning Reform

Whilst sentiment around the budget has been largely negative, there were some silver linings to take away. First, large public capital commitments and protected capital budgets for infrastructure and city development is something that has been sorely needed. Whilst this will not be of benefit in the short term, greater public investment in the long term should be something that property developers can benefit from, making more properties and sites viable for development through improved transport links and greater capacity within public services.

Further planning reform should also assist with this, with the budget proposing a “default yes” near transport links. Whilst the number of sites impacted will likely be modest, if implemented it will shorten approval times on certain brownfield and urban sites, improving time-to-exit and reducing planning risk for these projects. This can benefit all parties involved in planning bridges, development, and mezzanine financing for certain sites.

The Overall

Whilst there are a handful of positives to take away, some of the most relieving parts of the budget are the proposals, such as national insurance on rental income, which weren’t implemented, or those such as the mansion tax which are relatively small in their financial impact.

In the short term, we expect slower transactions and greater caution from landlords and property investors, as the market adjusts to increased taxes on rental income. Landlords and investors who own properties in their personal names now also have further incentive to restructure their ownership arrangements. This is an area the Pure Structured Finance Team specialises in, with fast funding options such as bridging and portfolio finance able to assist investors in a rapid transition to a more tax-efficient ownership structure.

To learn more about how we can assist, please give us a call on 02080 579 178, or send an email to info@purestructuredfinance.co.uk