Autumn Budget 2025: What the New “Mansion Tax” & Landlord Changes Mean – and Where Fractional Keys Fits In

The Autumn Budget 2025 just reshaped part of the UK property landscape – especially at the top end of the market and for private landlords.

Two measures stand out:

1. A new High Value Council Tax Surcharge (widely called a “mansion tax”) on homes worth over £2 million.

2. Higher income tax rates on rental profits from April 2027. 

This article looks at what those changes mean for:

• Traditional landlords

• Someone investing through a platform like Fractional Keys

• Property prices in the £2m+ bracket

1. The headline changes in the Autumn Budget

High Value Council Tax Surcharge (“mansion tax”)

From April 2028, residential properties in England valued at £2 million or more will face an extra annual levy – the High Value Council Tax Surcharge (HVCTS). 

Key points:

• Applies only to homes valued at £2m+ (based on 2026 valuations).

• Charged in four bands, on top of normal council tax:

  • £2.0m–£2.5m: £2,500 per year

  • £2.5m–£3.5m: £3,500 per year

  • £3.5m–£5.0m: £5,000 per year

  • £5m+: £7,500 per year

• Paid by owners, not occupiers.

The government expects fewer than 1% of homes in England to pay the surcharge – roughly 100,000 properties – and to raise around £0.4bn per year once fully in place. 

Higher income tax on rental profits

From 6 April 2027, rental profits will be taxed in separate “property income” bands at higher rates than today: 

• Basic rate: 22% (up from 20%)

• Higher rate: 42% (up from 40%)

• Additional rate: 47% (up from 45%)

This is in addition to all the previous changes landlords have absorbed over the last decade (loss of full mortgage-interest relief, tighter regulation, EPC requirements, etc.). Property market commentators describe this as a clear tax squeeze on private landlords. 

2. What this means for traditional landlords

Everyday landlords (sub-£2m properties)

Most small and mid-sized landlords won’t be touched by the mansion tax at all. Their properties simply sit below £2m.

However, the 2-point increase in income tax on rental profits hits almost everyone with taxable property income:

• Example: higher-rate landlord with £20,000 of taxable rental profit

  • Before April 2027: 40% → tax = £8,000

  • After April 2027: 42% → tax = £8,400

That’s £400 less net income each year on the same portfolio.

For landlords already stretched by rising costs and tighter margins, this:

• Reduces after-tax yield

• May encourage some to increase rents

• Pushes others toward selling, incorporating, or pausing expansion

High-end landlords (over £2m per property)

Landlords owning £2m+ rentals are hit twice:

1. The higher income tax on rental profits, and

2. The new mansion tax levy of £2,500–£7,500 per property each year.

For example, on a £3m rental property:

• Surcharge band is likely £3,500 per year

• On top of regular council tax and increased income tax on rent

On a £3m asset, £3,500 per year won’t cause a fire sale by itself – but it chips away at net return, especially if yields were already slim.

Prime London agents are already warning about:

• Softer demand at the £2m+ threshold

• Pressure for sellers to price below the line

• Some overseas or discretionary owners deciding to exit or not buy in England at all

3. Landlord vs Fractional Keys investor

This is where the contrast becomes interesting – because Fractional Keys is built very differently from the classic “one landlord, one buy-to-let” model.

A. Price point: below the mansion-tax firing line

The new surcharge is aimed squarely at high-value homes:

• Threshold: £2m+

• Expected to hit <1% of properties in England

Fractional Keys’ strategy, by contrast, is focused on:

• Rundown or value-add properties

• Renovating and holding them as quality rentals

• With an all-in cost well below £2m per unit

So:

• The mansion tax doesn’t directly apply to the types of properties Fractional Keys is targeting.

• We’re playing in the everyday housing market, not the trophy-asset space.

B. Tax treatment: property business vs investment exposure

For a traditional landlord:

• Rental profit is reported as property income.

• From 2027, that is taxed at 22%, 42% or 47%, depending on the band. 

For someone investing through a platform like Fractional Keys:

• You don’t personally own a buy-to-let and file it as a property business.

• You own shares or units that give you exposure to rental income and capital growth.

• Your personal tax position may look more like investment income / capital gains rather than pure property-business income – though the exact treatment will depend on the final legal structure and your own circumstances.

In other words, policy changes targeted squarely at “landlords with rental profits” may not always bite in the same way for someone holding a fractional investment instead of running a direct letting business.

⚠️ Not tax advice: Everyone’s situation is different – anyone making decisions should speak to a qualified tax adviser.

C. Hassle vs hands-off exposure

Traditional landlords:

• Deal with tenants, voids, repairs and compliance

• Must adapt to every new regulatory or tax tweak themselves

Fractional Keys investors:

• Get exposure to rental income and capital appreciation

• While a professional team handles sourcing, refurbishing, letting and compliance in the background

As the tax and regulatory environment gets more complex for DIY landlords, the appeal of a more passive, diversified route into property is likely to grow.

4. What this means for Fractional Keys as a platform

Taken together, the Autumn Budget nudges the market in a direction that actually supports the logic behind Fractional Keys:

• Landlords’ tax burden rises → Some exit or stop buying.

• Rental supply tightens → Supports rental values and yields, especially in strong regional markets.

• Mansion tax hits the top 1% of properties → No direct hit on the kind of sub-£2m housing stock we’re targeting.

This could create more situations where:

• A private landlord chooses to sell an ageing or under-loved property.

• A professionally managed vehicle (like the ones behind Fractional Keys) can buy, refurbish and hold that property more efficiently at scale.

The platform can then:

• Package those opportunities into fractional investments,

• So that everyday investors can participate from smaller amounts,

• Without taking on the new landlord-specific tax and admin burdens themselves.

Fractional Keys is currently:

• Preparing for launch in 2026,

• Getting close to having the first property ready for listing, and

• Designing a structure built specifically for this new environment of higher landlord taxes and tighter regulation.

5. What could happen to £2m+ property prices?

The big question is whether the mansion tax will hurt values in the £2m+ bracket.

A few realistic scenarios:

1. Price sensitivity around the £2m line

Some buyers will look at an extra £2,500–£3,500 per year and ask:

“Is this house really worth tipping into the surcharge band?”

That can cause:

• More negotiation on price

• Sellers keeping properties just below £2m to avoid triggering the levy

2. Softening – but not a crash – at the very top

Analysts expect:

• Some discretionary, second-home or overseas owners to reconsider high-value purchases

• A possible increase in listings as owners bring sales forward

• Slight downward pressure at £2m–£3m+

But nationally, the impact is likely to be contained:

• Only a small fraction of homes are in the affected price band.

• Official forecasts still expect UK house prices overall to grow modestly, averaging around 2.5% a year from 2026 onwards, with the average home rising from roughly £260k in 2024 to just under £305k by 2030. 

So the surcharge looks more like:

• A targeted drag on very high-value properties,

• Rather than a fundamental shift in the outlook for the mainstream housing market where Fractional Keys operates.

6. Key takeaways

• The Autumn Budget introduces a mansion tax on homes over £2m and higher income tax on rental profits from 2027. 

• Everyday landlords (sub-£2m) are mainly hit by the extra 2% on property income, while high-end landlords get squeezed by both higher tax and the new surcharge.

• Fractional Keys’ focus on sub-£2m, value-add properties means the mansion tax doesn’t directly affect the assets it targets.

• For investors, fractional ownership offers a way to stay exposed to rental income and capital growth without personally becoming a landlord in an increasingly hostile tax environment.

• In the £2m+ bracket, expect more price sensitivity, negotiation and potential clustering below the threshold, but not necessarily a nationwide price shock.

As the rules keep evolving, the big question isn’t “Is property dead?” – it’s “What’s the smartest way to own it?”

Fractional Keys is being built for the version of the market where tax-efficient structures, diversification and professional management matter more than ever.