Ima Ghasri, managing director at regulated property buyer Good Move, shares his response to the recent Budget announcement, explaining the changes that will affect homeowners, landlords and tenants.
Cash ISA changes
Cash ISAs have historically allowed users to save up to £20,000 tax-free each year. However, Wednesday’s Budget confirmed this limit will be reduced to £12,000 each year, for under-65s, starting April 2027.
This change reduces the amount of money savers can shield from tax, meaning less tax-free interest on total savings. Ghasri comments, “Whilst more than 40% of ISA subscribers currently save under the previous £20,000 limit, the reduced allowance for under-65s will still have a meaningful impact on higher value savers and on those who strategically use multiple ISAs to maximise returns. Beyond this, the broader issue of overall affordability remains really important.
“Although savers can still invest up to £12,000 per tax year, any returns above this threshold will be taxable, leaving a mark on the incentives and benefits of saving through government systems and narrowing the options for building deposit funds in a tax-efficient way. It’s important to consider the impact on the affordability of mortgages for first-time buyers, as the cuts will completely change the way in which people step onto the property ladder. If savers reduce their amounts saved via ISAs, borrowers must reduce the amounts that they can lend, making it a slightly more complex market to move through.”
Income Tax changes
Whilst there was no direct change to the rate of income tax, the freezing of tax thresholds, the point at which you start paying or move into a higher tax band, could result in tax increase for many. As wages rise with inflation, it is likely more people will be pulled into a higher tax bracket, reducing disposable income.
Nima Ghasri explains how this will impact the market: “You may be impacted by less disposable income, which could impact both your saving and your spending on repairs or mortgage overpayments. Similarly, for those renting out their properties, with the higher effective tax and less disposable profits, there may be a need to increase rental prices.”
The Chancellor also announced an increase in basic, higher, and additional property income tax rates by 2% from April 2027.
This will ultimately reduce net returns for landlords and could mean we see an increase in rental prices for tenants as landlords seek to offset the additional costs. Alternatively, this may prompt those with smaller portfolios to exit the market entirely, adding to the volume of properties coming up for sale.
The ‘mansion’ tax
The Budget also confirmed the introduction of the long speculated ‘mansion tax’, a surcharge on properties valued over £2 million.
Nima comments: “The changes will be felt most acutely in areas such as London and the South East, where property values have risen far above the national average. Even if their income hasn’t grown in line with their property’s valuation, is it likely homeowners in these areas will find themselves paying more each year.
“Similarly, for the estimated 100,000 properties, the surcharge added to council tax bills will increase the tax burden for those with the highest value of homes, relieving the pressure from those UK homeowners with lesser valuing properties, such as lower income people and families, as well as first-time buyers. This being said, for those in the top property bracket, who are asset-rich but have poor cashflow, they could now be in a more difficult position, requiring a significant adjustment to their finances, and potentially housing situation.
“Ultimately, the reforms will reshape the distribution of council tax, asking for more concentrated financial support from owners of the UK’s most expensive houses and relieving affordability concerns of those looking to join, or owning lower value properties, in high-value property markets.”
The Budget introduces a series of financial shifts, from reduced ISA allowances impacting first-time buyer savings to new tax pressures on landlords and high-value homeowners. Despite widespread speculation regarding a potential shake-up, the Chancellor elected not to introduce any changes to Stamp Duty Land Tax.
Commenting on the overall picture, Nima concludes: “The key takeaway is that these reforms create new affordability challenges and opportunities across the entire property spectrum. While Stamp Duty remains untouched, the changes to income tax and saving incentives are significant. It is vital that homeowners, landlords, and prospective buyers review their personal finances to ensure security and make realistic plans.”
