What Rachel Reeves’ Property Tax Plans Could Mean for Landlords and Tenants

The Proposal

Chancellor Rachel Reeves is looking at a big shake-up of how property is taxed in the UK. The Treasury faces a budget gap of around £40–51 billion, and housing is firmly in the spotlight.

Some of the ideas being considered include:

• Ending the capital gains tax exemption on very expensive homes (those worth over about £1.5 million). At the moment, if you sell your main home, you don’t pay CGT. Reeves may change that so that a slice of the profit is taxed.
• Introducing a new annual tax on expensive homes, sometimes called a “mansion tax”. For example, this could be a percentage charge each year on properties worth more than £500,000.
• Replacing outdated council tax and stamp duty with a new property tax based on up-to-date house values. At the moment, council tax is based on valuations from the 1990s, so people in cheaper homes often pay a bigger share of their income than those in expensive homes.

Nothing has been confirmed yet, but the Budget this autumn is expected to reveal more.

The Implications to Landlords

A Risk of Double Payments

Right now, tenants usually pay council tax, while landlords pay stamp duty when they buy a property. If Reeves introduces a new property tax for owners without scrapping council tax for tenants, both sides could end up paying on the same property — tenants paying their share through council tax and landlords paying a separate tax on top.

Higher Costs and Lower Profits

If landlords suddenly face a new yearly property tax (on top of the income tax and other costs they already pay), it will naturally make it harder for them to make money from renting without putting rents up to cover the added costs. But many tenants are already stretched to their limits and will not be able to afford more rent increases. This ‘affordability ceiling’, together with proposed rent caps being introduced in The Renters’ Rights Bill, will make it even harder for landlords to make a profit in the Private Rental Sector (PRS).

Slower Property Price Growth

If even more landlords decide the numbers no longer stack up and sell their properties, as widely expected, there may be a tsunami of ex-rental homes going to market. While landlords selling multiple properties in the same area at the same time as other landlords selling similar properties, may have an immediate downward impact on property prices, the biggest impact of a huge rise in ex-rental property flooding the UK market is likely to be to those landlords whose main financial motivation has been building up equity (rather than rental profit).

Historically, for many landlords, being a landlord was a long term way to buy property and sell 10+ years later at a much higher price due to unprecedented demand and huge price growth.

A general cooling of the housing market, coupled with economic uncertainty, has led to decreased overall demand in property demand which is impacting property price growth forecasts. If property prices do not increase at the same rate as inflation, its real value decreases and many landlords who have previously enjoyed much higher periods of annual growth peaking at 14 percent in July 2022, may feel the hassle of being a landlord is no longer a worthwhile and viable long term plan to grow their money as reliably as other options. 

The UK annual inflation rate, measured by the Consumer Prices Index (CPI), was 3.8% in July 2025 while UK property prices saw a 3.9% annual increase between May 2024 and May 2025, with a 0.5% rise in the 12 months before that. However, there was a period of slower annual price growth in late 2024 and early 2025, with some forecasts predicting only modest gains for the rest of 2025. Regional variations exist, with the North of England seeing stronger growth than the South. 

The Implications to Tenants

Will Tenants Still Pay Council Tax?

At the moment, tenants are responsible for paying council tax (except in HMOs, where the landlord pays). Unless the government scraps council tax completely, that system is unlikely to change in the short term. However, if council tax is eventually replaced with a new property tax, the question is who will be asked to pay it — the tenant or the landlord? That detail will be critical.

Possible Rent Rises

If landlords face extra taxes, many will try to pass some of the cost onto tenants by putting rents up. Others might leave the rental market altogether, reducing supply and driving rent prices up further. Either way, renters may feel the squeeze.

Final Thoughts

Reeves’s tax plans are still at the discussion stage, but they could have a big impact on both landlords and tenants.

Smaller landlords in the private rented sector (PRS) are likely to feel these changes more than the big players. Many small landlords still have mortgages and rely on steady rent payments to cover their costs while slowly building up equity in their properties. That means new taxes directly eat into their monthly margins, and because tenants can only afford so much, there’s a limit to how much of those costs can be passed on.

Larger landlords, by contrast, often own their properties outright and view them as long-term income assets. They are less reliant on price growth or tenant affordability to make the numbers work, so they can absorb changes more easily.

In short, the small landlord who sees property as their retirement plan is far more exposed than the institutional investor with a portfolio that already pays for itself.

The crucial question is whether Reeves will replace council tax or simply add another tax on top. If it’s the latter, both landlords and tenants could end up paying more on the very same property.