Leading up to the Autumn Budget 2025, the UK property sector was rife with speculation. A few days before the Chancellor’s speech, we published a strategic advisory piece titled ‘The November Fiscal Reckoning,” warning investors of a potential “financial threat” driven by rumoured tax hikes.
Now that the dust has settled on Rachel Reeves’ “Statement for Growth,” we can audit those fears. Did the “Fiscal Reckoning” materialise as predicted, or did investors dodge a bullet?
Here is the comparison between our pre-budget warnings and the actual policies delivered.
The "NIC Nightmare" vs. The Surcharge Squeeze
Table of Contents
The Fear
The most significant alarm bell in the Autumn Budget 2025 was the widely rumoured introduction of an 8% National Insurance Contribution (NIC) levy on rental profits. The analysis warned this could “drastically erode net yields” and reduce net returns by approximately 10%, effectively acting as a double-tax on landlords.
The Reality
The 8% NIC levy did not happen.
However, the Chancellor introduced a functional equivalent, albeit at a lower rate. From April 2027, the government will decouple property income from standard income tax bands, introducing a new Property Income Tax surcharge. Rates will rise by 2 percentage points across the board:
- Basic Rate: Rises from 20% to 22%
- Higher Rate: Rises from 40% to 42%
- Additional Rate: Rises from 45% to 47%
The Verdict
Partial Hit. While the 8% NIC threat was a worst-case scenario that didn’t materialize, the 2% surcharge confirms the government’s intent to target “passive” income. It is a blow, but significantly softer than the “reckoning” we anticipated.
The Mansion Tax
The Fear
We warned of a “Mansion Tax”—a potential 1% annual levy on property values exceeding £2 million. On a £2.5 million home, a 1% charge would have cost the owner £25,000 per year.
The Reality:
The Chancellor did introduce a levy on high-value homes, termed the High Value Council Tax Surcharge, effective from April 2028. However, the structure is a banded fee rather than a percentage of value:
- Properties over £2 million: £2,500/year surcharge.
- Properties over £5 million: £7,500/year surcharge.
The Verdict
Softer Reality. The prediction was directionally correct—a levy was introduced—but the financial impact is vastly lower than feared. A £2.5 million home will pay £2,500, not the £25,000 feared under a 1% model.
Capital Gains Tax (CGT) & Reliefs
The Fear
The article highlighted a risk of “CGT Erosion,” specifically fearing the removal of Private Residence Relief (PRR) on main homes worth over £1.5 million. There was also a broader fear of CGT rates aligning with income tax.
The Reality
In a surprise move, Capital Gains Tax rates remained unchanged at 18% and 24% for residential property. Furthermore, no cap was placed on Private Residence Relief.
The Verdict
A Bullet Dodged. This was the biggest win for investors compared to the pre-budget gloom. The feared raid on capital gains and main home exits did not occur.
The Structural Shift in the Autumn Budget 2025: Is the SPV Still King?
The Advisory
Our core advice was to “incorporate.” They argued that moving properties into a Limited Company (SPV) was the ultimate mitigation tool to avoid Section 24 interest restrictions and the rumoured NICs.
The Reality
The budget reinforced this advice, though for slightly different reasons.
- Section 24 remains: Personal landlords still cannot deduct full mortgage interest, which is the primary driver for incorporation.
- Personal Tax Hikes: With personal property tax rates rising to 47%, the gap between personal tax and the 25% Corporation Tax rate remains significant.
- Dividend Tax Rise: The budget did increase Dividend Tax by 2% (to 35.75% for higher rate), which slightly reduces the efficiency of extracting profit from an SPV.
The Verdict
Strategy Validated. Even without the NICs, the new 2% surcharge on personal property income widens the tax gap between personal ownership and corporate structures. Liddle Perrett’s recommendation to use bridging finance to facilitate transfers into SPVs remains a sound, if complex, strategy for portfolio landlords.
A "Reckoning" Deferred?
Our article prepared clients for a “November Fiscal Reckoning.” The actual Budget was less a reckoning and more of a tightening.
- Predicted: 8% NIC, 1% Wealth Tax, CGT Hikes.
- Actual: 2% Income Surcharge, Fixed-Fee Council Tax Surcharge, No CGT Change.
Investors who prepared for the worst in the Autumn Budget 2025 based on our warnings will likely breathe a sigh of relief. The costs of being a landlord have gone up, but the sector avoided the “collapse” scenarios that were on the table.
Frequently Asked Questions (FAQs)
Did the feared 8% National Insurance (NIC) levy on rents happen?
No. The rumored 8% Class 4 NIC charge on rental profits was not introduced.
However, the Chancellor did increase the tax rate on property income. Starting April 2027, a 2% Property Income Surcharge applies to all bands.
- Basic Rate: 20% to 22%
- Higher Rate: 40% to 42%
- Additional Rate: 45% to 47%
I heard about a "Mansion Tax." Will I be charged 1% of my property’s value?
No. The feared 1% annual levy (which would have cost £25,000 on a £2.5m home) did not materialize.
Instead, a High Value Council Tax Surcharge begins in April 2028 for homes valued over £2 million. It is a fixed annual fee, not a percentage:
- £2m – £5m Value: You pay £2,500 per year.
- £5m+ Value: You pay £7,500 per year.
Have Capital Gains Tax (CGT) rates gone up for landlords?
No. Contrary to widespread fears of alignment with income tax, CGT rates for residential property remain frozen at 18% (basic) and 24% (higher). The Private Residence Relief (PRR) for selling your main home also remains uncapped.
Has "Section 24" mortgage interest relief changed?
Yes, slightly for the better.
Currently, landlords get a tax credit equal to 20% of their mortgage interest payments. Because the new “Property Basic Rate” is rising to 22% in 2027, the Section 24 tax credit will also rise to 22%.
Note: While this is a small improvement, you still cannot deduct the full interest from your taxable profit, so higher-rate taxpayers still face a significant tax gap.
Is it still worth moving my properties into a Limited Company (SPV)?
Yes, in most cases.
Even though the 8% NICs didn’t happen, the new 47% top rate on personal property income makes personal ownership more expensive.
- Corporation Tax remains at 25% (for profits over £250k) or 19% (for profits under £50k).
- Dividend Tax is increasing by 2% (to 35.75% for higher rate) from April 2026, which makes taking money out slightly costlier, but the ability to retain and reinvest profits within the company remains tax-efficient.
When do these changes actually start?
- Dividend Tax Hike: April 2026
- Property Income Tax Hike (2%): April 2027
Mansion Surcharge: April 2028 (based on 2026 valuations)
Disclaimer
Always seek professional advice from a qualified accountant, tax adviser, or property-finance specialist before acting.
The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK
The information contained within was correct at the time of publication but is subject to change.
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