Reeves's tax calculus: what mortgage professionals should expect from the autumn Budget

Rachel Reeves’s second Budget is being shaped by a stubborn fiscal shortfall and a weak growth outlook. Treasury officials worry that lower productivity and softer forecasts from the OBR could enlarge a funding gap already estimated in the tens of billions. Within that context, the Chancellor is weighing a package that leans on property and business taxation while attempting to keep headline rates on employment income untouched. For mortgage lenders, brokers and buy-to-let specialists, the direction of travel matters as much as the detail: measures that alter transaction costs or landlord profitability can move pricing, appetite and volumes quickly.

Rachel’s Choice

1) National Insurance on rental income
The Resolution Foundation has advocated extending National Insurance to landlords’ rental earnings, with a basic rate and a higher marginal charge above a threshold. Phased in, the think tank believes such a policy could raise roughly £3bn a year once mature. Ministers have not confirmed the idea, but it is under active consideration in Whitehall and is politically easier to defend than changes to headline rates on wages. Importantly, the proposal would not apply to corporate landlords.

Mortgage market lens: Higher recurring tax on rent receipts would squeeze net yields for smaller, personally owned portfolios. Expect some combination of rent increases, deleveraging, and a shift to limited-company structures. In the short run, lenders could see more remortgage enquiries from owners reorganising holdings; over time, a thinner pool of private landlords would reduce purchase volumes in the mid-price bracket.

2) Capital gains tax and the primary residence exemption at the top end
Officials are modelling whether to limit principal-residence CGT relief for higher-value homes. The size of any threshold is decisive: the CGT system raised £13.3bn last year across all assets, but removing a long-standing exemption for expensive main homes would be controversial and could slow sales in prime areas.

Mortgage market lens: A cap on relief above a set value would deter discretionary moving among equity-rich households, particularly in London and the South East. Chains would lengthen; high-LTV movers would face fewer onward options; and brokers would see more interest in further-advance and second-charge products as owners improve rather than move.

3) Stamp duty reform or replacement
Abolition of stamp duty has been floated in tandem with a new national, proportional property tax on homes bought for more than £500,000, paid annually rather than upfront. One version would apply a percentage to the slice above £500,000, with a higher rate beyond £1m, aiming to yield revenue comparable to the £11.6bn collected by stamp duty last year.

Mortgage market lens: Removing the upfront drag would be positive for mobility and new lending at the point of purchase, but an annual levy would affect affordability assessments and debt-service ratios. Underwriters would need to model the new recurring cost alongside council tax and insurance. Any transition period will be pivotal: if buyers wait to see the detail, pipelines will slow ahead of the Budget.

4) Council tax modernisation (longer-term)
Re-banding or replacing the 1991-based system is technically complex and politically sensitive. Work continues inside government, but wholesale reform looks more like a multi-year project than a November announcement. Nevertheless, the interaction with any national property levy will need careful choreography.

5) VAT threshold and small-business growth
Treasury officials have examined raising the VAT registration threshold above the current £90,000 to reduce the cliff-edge that discourages expansion. Business groups argue that a higher threshold would help micro-firms, including trades supporting housing transactions and home improvements. Others in government circles favour smoothing or lowering the threshold to capture more activity within the net. The OBR previously judged that a threshold rise had short-term costs but could improve receipts later in the decade as firms grow.

Mortgage market lens: Any move that encourages trades and SMEs to expand can lubricate housing activity at the margins—faster completions, more new-build capacity, and a livelier home-improvement market that supports further-advance lending. Conversely, tightening the threshold would add administrative burden for smaller contractors, risking capacity just as housing supply is supposed to improve.

6) Banks and windfall mechanics
Separately, Labour-leaning voices have revived the case for a special levy on large lenders or a tweak to the bank surcharge. Estimates suggest a few billion pounds could be raised annually. Markets have already signalled discomfort: bank shares have wobbled on speculation of a raid.

Mortgage market lens: An extra charge on banks would harden funding and capital constraints. Expect a defensive response—tighter risk appetite, selective product withdrawals at the margin, and slower pass-through of rate cuts to mortgage pricing.

What this means for your pipeline

• Pre-Budget pause: Talk of new property taxes is already encouraging “wait-and-see” behaviour among prospective buyers, particularly around the £500,000–£1m band where multiple proposals intersect. Build longer completion buffers into forecasts for Q4 and early Q1.
• Landlord behaviour: If National Insurance on rents is announced—even with a phase-in—anticipate more incorporations, disposals of marginal units and heavier focus on high-yield regions. Brokers should prepare calculators that compare personal vs. limited-company outcomes net of tax and fees.
• Affordability modelling: An annual property levy would need to be captured explicitly in affordability tests. Lenders will want consistent treatment across intermediaries; start updating advice templates now so clients understand that “purchase price” and “ongoing levies” are separate decisions.
• Product mix: In a slower transaction market, further advances, green improvement loans and second-charge finance typically take share. Firms with strong conveyancing and refurbishment networks will have an advantage if “improve not move” becomes the default choice for higher-value owner-occupiers.
• Regional tilt: Measures framed by value thresholds concentrate effects. London and the South East would carry most of the burden from any CGT change on expensive main homes and from a proportional levy above £500,000. Lenders with concentrated exposure should revisit regional limits and appetite.

The politics behind the arithmetic

The Chancellor has ruled out rises in the main rates of income tax, employee National Insurance and VAT. That narrows the menu to property and business measures, the timing of planning reform, and a handful of targeted interventions. Inside Whitehall, there is also debate over how much to rely on reliefs and thresholds versus structural change. A higher VAT threshold, for example, is presented by some officials as a growth measure; others argue for a simpler system with fewer carve-outs. Meanwhile, the Treasury’s desire to signal stability collides with the reality that rumours alone can dent market confidence.

Taking money from home owners

So just how much does do your clients pay each year? (£bn)

Base case for November

Taken together, the most plausible package for the autumn is a combination of landlord National Insurance (with staging), a pathfinder property-tax reform that either reshapes stamp duty or signposts an annual levy at higher values, and a business-facing change on VAT thresholds or smoothing to signal pro-growth intent. A bank-sector measure remains possible if the hole in the numbers widens.

For mortgage professionals, the task is twofold. First, keep clients moving by clarifying timelines and potential grandfathering: many changes, if adopted, will not bite immediately. Second, prepare playbooks for each scenario—how affordability will be recalculated if an annual property levy arrives; how portfolio landlords should restructure; which products serve homeowners who choose to renovate rather than relocate.

The Chancellor wants to present a Budget that fixes the public finances without choking off growth. In housing and mortgages, the line is thin: shift transaction costs too much and activity stalls; squeeze landlords too hard and rental supply shrinks; hit banks and credit transmission weakens. The next eight weeks will determine where that line is drawn.