Chancellor Rachel Reeves’ first budget, delivered on 26 November 2025, contains wide‑ranging tax and welfare measures. There was a lot of speculation in the run‑up to the announcement about sweeping changes to stamp duty and inheritance tax. In reality the budget is more measured, but it still contains reforms that will affect how families in West Berkshire buy, sell or keep a home. As a high‑street firm we have summarised the key points in plain English.
1. A new “mansion tax” on homes over £2 million
A headline of the 2025 budget is the High Value Council Tax Surcharge, dubbed the “mansion tax”. From April 2028 owners of homes valued over £2 million will pay an annual surcharge on top of their existing council tax. It will be levied in four bands:
| Property value | Annual surcharge |
|---|---|
| £2 million – £2.5 million | £2,500 |
| £2.5 million – £3.5 million | £3,500 |
| £3.5 million – £5 million | £5,000 |
| Over £5 million | £7,500 |
The levy will be collected alongside council tax and the money goes to the Treasury rather than the local authority. The surcharge is expected to raise around £400 million in 2029–30. It applies to fewer than 1 % of homes, but many high‑value properties are concentrated in the South‑East. The value of your property will be assessed by the Valuation Office Agency in 2026.
For households considering moving to a larger property, this is important because even homes around the £2 million threshold could be pulled into the tax if values rise after re‑valuation. The surcharge applies per property irrespective of occupancy, so separated couples who remain joint owners will still pay the charge. Family‑law specialists warn that this could make it difficult for a spouse to remain in the former matrimonial home after a divorce; they may need to renegotiate maintenance or consider selling.
What to do
Check your property’s estimated value. If your home or the property you are buying is near the £2 million threshold, speak to your estate agent or surveyor about likely post‑2026 valuations.
Factor the surcharge into budgets and divorce settlements. The annual charge is a new running cost; ensure you discuss it with your solicitor when negotiating financial arrangements or drafting a separation agreement.
Understand that stamp duty remains unchanged. Despite rumours of abolition, no changes were announced to Stamp Duty Land Tax (SDLT), so current rates still apply when you buy.
2. Income‑tax thresholds frozen and property income tax rises
While there were no headline increases in general income tax rates, the chancellor froze the personal allowance and income‑tax bands until the 2030‑31 tax year (effectively April 2031). The Office for Budget Responsibility expects this so‑called “fiscal drag” to bring 780,000 more basic‑rate and 920,000 more higher‑rate taxpayers into tax by 2029/30. For families planning a move, higher tax bills can erode disposable income and affect mortgage affordability.
In addition, the budget introduces separate tax bands for property income. From April 2027 the tax on rental and other property income will rise by 2 percentage points across all bands. Landlords will pay property‑income tax at 22 %, 42 % and 47 %, depending on their income. The aim is to narrow the gap between tax on earned income and passive income. This change could encourage some landlords to sell and may lead to higher rents. For tenants looking to move, this may affect budgets; for investors, it is an extra cost to consider.
What to do
Budget for higher taxes. With thresholds frozen and property‑income tax rising, use a mortgage calculator to ensure you can afford repayments even if your take‑home pay falls in real terms.
If you rent out property, review your rental agreements and financial plans. Consider whether to incorporate rental income in a company (which pays corporation tax) or to retain property personally. Seek tax advice before making changes.
3. Estate‑planning: Inheritance tax freezes and new transferable reliefs
The budget did not overhaul inheritance tax (IHT) but made some important adjustments. The Nil Rate Band (£325,000) and Residence Nil Rate Band (£175,000) will stay frozen until April 2031. Because property values have been rising, freezing these thresholds will draw more estates into the IHT net. The Government confirmed that unused pension funds and death benefits will be brought into the scope of IHT from April 2027. Executors can ask pension schemes to withhold up to half of the pension fund to pay the IHT.
On a positive note, the budget makes the Business Property Relief (BPR) and Agricultural Property Relief (APR) transferable between spouses and civil partners. This will particularly help farming and business families; widows whose spouses died before April 2026 could gain an additional £1 million relief.
What to do
Review your Will and estate plan. Frozen thresholds mean more families – even those who do not consider themselves wealthy may incur IHT. Updating your Will, making use of the Residence Nil Rate Band and considering lifetime gifts can reduce exposure.
Consider pension planning. Because unused pension funds will soon form part of the estate, speak to a financial adviser about how best to draw down or pass on your pension.
Use new reliefs. If you or your spouse run a business or hold agricultural assets, explore whether the new transferable BPR/APR rules benefit your estate.
4. Family‑law implications: revisiting divorce settlements and housing arrangements
The budget’s tax changes will have knock‑on effects on family law. Family lawyers warn that the mansion tax could make it difficult for separating couples to afford the former family home. If the home is above the £2 million threshold, the annual surcharge may force a sale or require an increase in maintenance payments. The budget also freezes income‑tax thresholds and increases property‑income tax, reducing net take‑home pay.
Family‑law experts note that pensions are affected too: the state pension will rise by 4.8 % from April 2026, but because the personal allowance and tax bands are frozen, many pensioners will start paying income tax on their state pension in 2027.
Speculation in the property market and the new tax surcharge will slow transactions and impact housing needs for both parties, forcing many couples to revisit agreements. Changes to pension taxation and withdrawal rules also disrupt pension‑sharing orders, requiring fresh analysis.
What to do
If you’re negotiating a separation, review arrangements with a solicitor. Ensure that any settlement accounts for the future cost of the mansion tax, possible rental increases and changes to pension rules.
Consider alternative housing solutions. Downsizing or renting may become more attractive for divorcing spouses unable to afford a high‑value property.
Take early advice on pensions. Pension‑sharing orders may need to be recalculated as tax rules evolve.
5. No immediate stamp‑duty changes – but consultations ahead
Before the budget there was much talk of abolishing Stamp Duty Land Tax (SDLT) or transferring the tax burden from buyer to seller. In the end, the chancellor left SDLT unchanged. There was also speculation about doubling the highest council‑tax bands, which did not happen.
However, Government documents indicate that consultations on wider property‑tax reforms will begin in early 2026, including:
Reliefs and exemptions for the mansion tax;
Possible reform of Council Tax, with updated valuations and new bands;
A review of the Lifetime ISA and proposals for a new product to help first‑time buyers.
For now, buyers and sellers in West Berkshire can continue to rely on the existing SDLT regime. But the consultations mean further changes could arrive within a year or two. If you plan to move home soon, it may be sensible to act under current rules rather than wait for potential reforms.
The 2025 budget does not overhaul property taxes, but it does introduce targeted measures that will affect families and homeowners in West Berkshire. A new mansion tax will raise running costs for a small number of high‑value homes, property income tax will rise from 2027, inheritance‑tax thresholds remain frozen and divorce settlements may need to be revisited. At Marlborough Law we are here to help you navigate these changes. Whether you are buying, selling, renting or planning your family’s future, we offer clear advice tailored to your circumstances. Please contact us for a free initial consultation.
