How Will the Latest Budget Impact the Property Market?
The latest Budget brought long-awaited clarity to the housing sector, which should help get the property market moving again after a period of hesitation among homeowners and homebuyers. Rachel Reeves set out measures intended to create a fairer, stronger and more secure Britain, with the aim of reducing inflation and debt while increasing investment. Greater certainty on these points will now help to restore confidence in the property market.
Just before the Budget announcement, the OBR upgraded its growth forecast from 1% to 1.5%, which is a positive sign for the wider economy. However, the proposal that has drawn the most attention is the introduction of a so-called mansion tax. From 2028, properties in England valued at more than £2 million will face a council tax surcharge of £2,500, rising to £7,500 for homes valued above £5 million (using 2026 values). This is not a replacement for existing council tax fees, but an additional annual levy following a revaluation of homes in bands F, G and H. In Dorset alone, this will affect almost 25,000 households, representing around 9% of properties in the county.
It is an ambitious change, and like many homeowners, I am interested to see how it will be implemented. How will the state know the value of each home? The Government has not yet published a formal valuation method, so much remains uncertain. It is likely, however, that a combination of land registry data, local sales evidence and digital modelling will be used to estimate the value of higher band homes, particularly those that have not sold for many years.
As estate agents, we know how individual a valuation needs to be, so I am not convinced this approach will be flawless. An appeals process is therefore almost certain. For now, we simply know that a revaluation is coming, and the details will unfold gradually.
Increased Taxes on Property, Savings & Dividend Income
Alongside the mansion tax proposal, the Budget confirmed a 2% increase in the tax applied to rental income, savings income and dividends. Dividend tax rates will rise from April 2026, and property and savings income rates from April 2027. The aim is to reduce the disparity between the taxation of earned income and income from assets, as the latter does not carry National Insurance.
Inevitably, landlords are likely to feel the effect most directly. Higher taxation, combined with elevated maintenance costs and mortgage payments that remain above long-term averages, may encourage even more landlords to leave the sector. If this happens, the supply of rental homes could shrink further, which may place additional upward pressure on rents in high-demand areas such as Dorset.
The Outlook for the Dorset Property Market
It was reassuring to hear that the Government intends to boost trade, stimulate the wider economy and accelerate the delivery of new homes. Investment in national infrastructure, together with increased support for planning departments and local regeneration, is particularly welcome here in Dorset, where demand for homes consistently outpaces supply.
Although some of the headline tax changes may create short-term uncertainty, the overall picture remains positive. A more stable economic outlook, clearer long-term policy and stronger growth forecasts should help build confidence among homeowners, buyers and sellers.
Above all, it is a relief to have clarity at last and to move beyond the speculation that has overshadowed recent months. As further details emerge on how the new mansion tax will be rolled out, we will continue to keep you informed. If you believe you may be directly affected by the new levy, my door is always open, and I am happy to discuss your circumstances in more detail.
If you would like an up-to-date appraisal of your property or impartial guidance on its likely valuation, our team at DOMVS will be pleased to help.
