At noon on November 26(local time), UK Chancellor of the Exchequer Rachel Reeves formally delivered Labour’s second annual fiscal budget since forming the government in the summer of 2024 in the House of Commons.
As the third round of fiscal adjustments under the Labour government, this Budget introduces an additional £29.8 billion in tax increases. Combined with the £40 billion tax rise announced last autumn and the £14 billion increase introduced this spring, data from the Office for Budget Responsibility (OBR) show that the UK’s total tax burden as a share of GDP has risen to 38.3%, reaching a historic high.
Key Highlights at a Glance
From the scope of policy coverage, this £29.8 billion tax increase affects a wide range of groups, including salaried workers, investors, property owners and electric vehicle drivers. Public spending adjustments focus mainly on welfare, with families having three or more children becoming the primary beneficiaries of welfare policies.
Reeves made it clear in her report that £26 billion of the new tax increases will target luxury property owners and the gambling industry, while pension standards and the minimum wage will be raised simultaneously. This policy combination has been interpreted by the British media as a move to “tax the wealthy and ease the burden on working people.”
In her parliamentary speech, Reeves stated: “Today’s Budget is a continuation of the choices made since Labour took office in July 2024 — including cutting NHS waiting lists, easing cost-of-living pressures, and controlling debt and borrowing levels.” She also acknowledged that the measures in this Budget may face differing opinions, but emphasized that there is currently no alternative that better protects the interests of the working class or is fairer. Reeves noted that these policies are intended to build “a fairer, stronger and more secure Britain,” and said the Budget would help “bring inflation down and provide immediate support for families.”
Macroeconomic Data: Growth Forecast Revised Down, Inflation Pressure Remains
Released alongside the Budget were updated macroeconomic forecasts from the OBR. The data show that the UK economy is characterized by “adjusted growth expectations and continued inflationary pressure,” providing a macroeconomic backdrop for the implementation of fiscal policy.
Economic Growth: The OBR has revised its forecast for UK GDP growth in 2026 down to 1.4%, a decline of 0.5 percentage points from the 1.9% forecast in this spring’s Budget. However, the 2025 growth forecast has been revised up to 1.5%, becoming a positive adjustment in this round of projections.
Inflation Level: Inflation expectations have been revised upward compared with the spring forecast. CPI is expected to remain at 3.5% in 2025 (previously forecast at 3.2%), and inflation in 2026 is projected at 2.5% (previously 2.1%). These figures remain above the Bank of England’s 2% inflation target.
Core Policy Direction: Tax Increases and Public Welfare Measures in Parallel
Reeves’ Budget not only continues the fiscal approach of the Labour government but also introduces some notable policy changes.
Reduction in Borrowing Scale
Reeves pointed out that the UK’s net public debt is expected to reach £2.6 trillion this year, meaning that “for every £10 the government spends, £1 goes toward debt interest payments.” To improve this situation, she clarified that fiscal rules will aim to “reduce borrowing while supporting investment,” and set a concrete target: by the 2028/2029 fiscal year, the budget balance is expected to shift to a surplus of £3.9 billion, strengthening debt sustainability through a combination of tax increases and optimized spending.
Taxation Measures
Freezing of Personal Allowance Thresholds: The freeze on income tax and National Insurance thresholds will be extended by three years until April 2031. The previous Conservative government had already frozen thresholds from 2021 through 2028. This extension means that as wages rise naturally with inflation, more income will fall into taxable brackets, and some individuals may move into higher tax bands, creating a form of “stealth tax.”
Introduction of a Luxury Property Tax: Properties valued above £2 million will be charged £2,500 per year, while properties valued above £5 million will be charged £7,500 annually. This fee will be paid by property owners alongside council tax. Reeves stated that this surcharge is expected to raise more than £400 million by 2031 and will apply to less than 1% of high-end properties.
Electric Vehicles to Be Taxed: Pure electric vehicles and plug-in hybrid vehicles will formally be included in annual vehicle excise duty and paid together with road tax. The specific rates are 3 pence per mile for pure electric vehicles and 1.5 pence per mile for plug-in hybrids. Reeves emphasized that this tax revenue will be used to upgrade transport infrastructure, not only doubling road maintenance funding in England but also providing an additional £200 million for expanding the electric vehicle charging network.
Increase in Gambling Taxes: The gambling industry will see differentiated tax adjustments. Remote gambling tax will rise sharply from 21% to 40%, and online betting tax will increase from 15% to 25%. Tax rates for land-based gambling and horse race betting will remain unchanged, and all bingo taxes will be abolished from April 2026. According to Treasury estimates, this reform is expected to generate more than £1 billion in additional annual revenue for the government by 2031.
Public Welfare and Other Policies
Additional Funding for Local Governments: £13 billion in flexible funding will be allocated to seven mayors to support local authorities in deploying resources based on actual needs. At the same time, additional targeted funding will be provided to different regions: £370 million to Northern Ireland, £505 million to Wales, and £820 million to Scotland, precisely easing regional fiscal pressures and ensuring the operation of basic public services such as education and healthcare.
Increased Investment in Public Services: The Budget outlines several specific funding plans in public services. Among them, £5 million will be allocated for the construction of secondary school libraries to improve reading and learning environments for young people. An additional £18 million will be allocated specifically for upgrading playground facilities across England to enhance the quality of public leisure services.
Abolition of the Two-Child Benefit Cap and Other Welfare Policies: From April 2026, the two-child limit under Universal Credit will be formally abolished. Previously, benefits or tax credits could only be claimed for the first two children. With this restriction removed, families with three or more children will receive more support. In addition, the 5 pence cut in fuel duty will be extended to next September. Certain green energy programs will be cancelled to reduce household energy costs. More than 750,000 retail, hospitality and leisure venues will enjoy “permanently reduced business rates.”
Minimum Wage Increase: From April 2026, the minimum hourly wage for those aged 21 and above will rise by 50 pence to £12.71. For those aged 18 to 20, the minimum wage will increase by 85 pence to £10.85. The government plans to gradually remove this separate youth threshold and move toward a unified adult minimum wage system. The minimum wage for those aged 16 to 17 and for apprentices will rise from £7.55 per hour to £8.00, helping to safeguard the basic living standards of low-income groups.
Under This Policy Package, What Changes Will the UK Property Market See?
In this Autumn Budget, Reeves announced a property tax reform plan aimed at filling a £20 billion fiscal gap. Although the overall tone remains one of tax increases, the scale of adjustments to property policy is far below market expectations. Several key stabilizing measures send clear and positive signals to investors. The core opportunities are analyzed below from the perspectives of policy impact and investment logic.
Key Positive News: No New Annual Tax on Properties Above £500,000, Stamp Duty Unchanged
Widespread market concerns over the introduction of a new annual tax on properties valued above £500,000 did not materialize, relieving pressure on approximately 210,000 homeowners. Demand that had been on hold in core areas such as London and southern England is expected to recover in 2026. The Stamp Duty system remains unchanged, avoiding a demand cliff near key price thresholds and ensuring that entry barriers for first-time and essential homebuyers are not raised, providing a stable foundation for the market.
Targeted Regulation: Luxury Properties Above £2 Million to Pay a Surcharge, Limited Impact
From 2028 onward, properties in England valued between £2 million and £5 million will pay £2,500 annually, while properties above £5 million will pay £7,500 annually. This policy applies to only 0.5% of UK housing stock, and the tax burden is lower than market expectations. In the short term, it may cause slight fluctuations in high-value property transactions while achieving targeted fiscal revenue.
Rental Market: Higher Landlord Tax Burden Offset by Rising Rents
From April 2027, landlords’ income tax on rental earnings will increase by 2 percentage points (to 22%, 42% and 47% respectively), on top of the previous increase of the additional Stamp Duty surcharge on second homes to 5%, raising overall tax costs. However, the imbalance between supply and demand in the rental market provides a buffer: over the past five years, rents have risen by a cumulative 25%. As of June 2025, the average monthly rent reached £1,344, up 6.7% year-on-year, which is sufficient to absorb the increased costs.
Market Insight: Where Does the Investment Value of UK Property Lie?
Strong Policy Certainty and Manageable Risk: Previous negative market speculation regarding the expansion of capital gains tax and further rent taxation did not materialize. Adjustments are limited to luxury properties and landlords, while core systems such as Stamp Duty remain stable. This avoids abrupt policy shocks and provides a predictable environment for long-term investment.
Supply-Demand Imbalance Supports Dual Returns: The UK faces an average annual housing shortfall of 100,000 units, with rigid demand continuing to be released. In May 2025, the national average house price reached £269,000, up 3.9% year-on-year, with core cities showing strong resilience. Rents rose 6.7% year-on-year, and vacancy rates remain low in population inflow areas such as London and Manchester, supporting both capital appreciation and rental income.
Market Sentiment Recovering, A Window of Opportunity Emerging: As policy uncertainty eases, pent-up demand in areas with a high concentration of properties above £500,000 is expected to be released, boosting transaction activity. The market is currently at a stage where negative factors have been largely absorbed and demand is starting to rebound. Core-city owner-occupier homes and high-quality rental properties now present attractive investment opportunities.
In summary, the Budget has not shaken the fundamental outlook of the property market. Policy support, supply-demand imbalance and rising rents form multiple layers of support. The long-term investment value of UK property remains clear, and now is an opportune time for prudent allocation.
Lansha Daily Summary
This Autumn Budget centers on “fair taxation and prudent fiscal management,” and adjustments to property policy reflect the government’s emphasis on market stability. By exempting properties above £500,000 from a new annual tax and maintaining Stamp Duty stability, key confidence has been injected into the market. At the same time, targeted taxation of high-net-worth individuals through the luxury property surcharge avoids disruption to the mainstream housing market. Although landlords’ income tax has increased, the upward trend in rents has already formed an effective buffer.
For investors, the UK property market is currently in a prime investment phase where “policy risks have largely been released and fundamental support remains strong.” It is recommended to focus on areas with clear demand recovery such as London and southern England, as well as on rigid-demand residential properties in core cities with steady rental growth. Benefiting from the dual tailwinds of policy stability and market recovery, long-term value preservation and capital appreciation can be achieved.
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