Autumn Budget 2025 Predictions: Mortgage Market

The chancellor will deliver her second budget this autumn. Due to slow economic growth and high inflation, the government need to manage a £40 billion shortfall in public finances. There have already been reports about changes to taxes, including income tax and capital gains tax.

1. National insurance could be charged on property income
   Currently, national insurance (NI) contributions aren’t charged on property, savings, or pension. However, the chancellor has suggested landlords may have to pay NI on income received from their property.

   This won’t be shown as a rate increase, but as an expansion of the tax base. This idea is under consideration as the Treasury has calculated it could raise around £3 billion per annum.

2.  Stamp duty could be replaced with 'property tax'
   The idea to abolish stamp duty and replaced with a national proportional ‘property tax’ on homes has been talked about.

   Property tax would be paid by owner-occupiers on houses worth over £500,000 when selling up. The amount charged will be calculated by the value of the property, with the rate being determined by the central government. Stamp duty on second home would remain the same.

3. Possible limit to principal-residence capital gains tax for higher-value homes
   The capital gains tax system raised £13.3 billion in 2024. Getting rid of an exemption for high-value homes could deter equity-rich homeowners from moving, particularly in high-price areas such as London and the South East. This would have a knock-on effect by lengthening chains with high loan-to-value movers having fewer options.
   
   
4. Council tax could be replaced with a local property tax
   This has been mentioned, but it is a long-term plan, and may only take place if Labour wins the next election.
   
   
5. Special levy on large lenders or amendments to bank surcharges
   An extra charge on banks could mean some banks/lenders could be more risk-averse, withdraw certain products, and cut mortgage rates more slowly.
   
   
6. VAT threshold increase suggested to support smaller businesses grow
   There have been conversations around increasing the VAT registration threshold to over £90,000, which it is currently. There has been negative feedback that the current threshold is stopping small businesses from expanding. There are arguments that a higher threshold could help small firms, including trades that support housing activity, which will in turn assist the home-improvement market that supports further-advance lending. 

The Autumn budget will take place on 26th November.