Sceptical brokers wary of tax hikes 'slid in quietly'

It's finally here. After months of speculation, leaks and climbdowns, the Government will reveal its Autumn Budget on Wednesday. That's the good news. The bad news is it could contain all manner of tax hikes that will upend the housing market and roil the bond market. 

Uncertainty has paralysed the economy and Chancellor Rachel Reeves' speech will hopefully bring some clarity to the industry. But after the Government's U-turn on the proposed manifesto-busting increase in income tax, other measures – including those more closely linked to housing – are now even more in play. 

READ MORE: Budget jitters trigger early mortgage market slowdown 

With a £20bn–£30 billion deficit black hole to fill and the Treasury's sights firmly on housing taxation, mortgage professionals are braced for change. Understanding what's coming and what it means for clients is essential. 

Three potential measures include: 

1. Stamp duty reform 

Rumours have circulated for months that Chancellor Rachel Reeves could scrap stamp duty entirely—a move that would fundamentally reshape property transactions. Many in the industry largely back abolition, arguing that it acts as a drag on the housing market. 

However, a proportional property tax framework on homes over £500,000 could be introduced to replace it. Proposed base rates sit around 0.54%, rising above £1m. Unlike earlier leaks suggesting annual charges, this would be payable on sale, rising with inflation. For brokers working with higher-net-worth clients, this changes the game. Understanding how it works in practice is critical; helping clients model timing decisions becomes essential. Does waiting cost more or less under a new system? 

2. Capital Gains Tax 

One change could involve removing principal private residence relief on properties over a threshold, potentially £1.5m. For higher-rate taxpayers, that's a 24% charge on gains when selling their main residence. Downsizers face particular exposure. Where client portfolios include later-life movers or retirees considering relocation, this policy directly affects their plans—they could decide not to sell at all. 

3. Council tax overhaul 

Reports suggest a new local property tax of 0.44% on property values between £80,000 and £500,000, with homeowners paying at least £800 annually. The critical shift: bills would fall to property owners rather than the people living in the home, a fundamental change from how council tax operates now. 

The landlord problem 

The proposed 8% National Insurance on rental income is the biggest worry across the buy-to-let sector. The sector has already endured years of incremental tax hits via interest relief restrictions and recent surcharges. Add the Renters Rights Act, which comes into effect in May, and the fear is the budget could drive many landlords out of the business. 

Carolyn Dunion, of McKendry Dunion Financial, is blunt: "Systematic taxation of landlords over many years has already deterred new entrants and driven many from the sector. Adding another tax will mean property investment really makes no sense—and I'd question how much would realistically be raised from a dying sector." 

If this lands, the fallout could be immediate. Landlords will shift strategies: moving properties into limited companies, exiting the sector entirely, or reconsidering portfolio expansion. Brokers with buy-to-let clients need ammunition for urgent conversations, and understanding the mechanics of limited company transfers becomes essential. 

Watch for ripple effects 

While an increase in income tax is now off the table after the Government's embarrassing U-turn, brokers should be alert to the fact that measures targeting the top end cascade downward to other segments of the population, impacting affordability. 

Claire Towe, pictured above centre, of Meet Margo, said: "Women often buy later, and on lower incomes, so even small policy shifts have noticeable impact. If older homeowners face new taxes or higher costs, they may have less flexibility to pass on deposits or release equity. That adds pressure for younger buyers already dealing with rising rents, slower savings and tight affordability." 

Many first-time buyers rely on family equity. New taxes on downsizers means less flexibility for parents to help fund deposits. Add this to rising rents and tight savings rates, and first-time buyer affordability gets squeezed from multiple angles. Brokers working with younger borrowers should prepare for conversations about delayed purchases, family support scenarios, and stretched timelines. 

READ MORE: Policy whiplash leaves mortgage market struggling for momentum 

How will the bond market react? 

It's fair to say confidence in Reeves and Prime Minister Keir Starmer's ability to manage the deficit is not high. News of the income tax U-turn compounded that sentiment further, and yields on the 10-year gilt rose the most in a single day since early July. The yield—in effect, the interest rate—influences long-term fixed mortgage rates, so if the market is badly spooked by the Budget, the cost of borrowing is likely to rise. 

The biggest risk, therefore, is if Reeves disappoints, leading to a sharp rise in bond yields. Can she cover the deficit with credible, decisive measures that will lead to borrowing costs easing? 

David Zahn, head of European fixed income at Franklin Templeton, told The Guardian that the Labour government's inability to push through spending cuts means bond investors are unlikely to give the budget a warm welcome. 

"If you're not going to tackle any of the big taxes, I don't see what you can do that the market will say 'fantastic, you fixed it', because you're not doing any spending cuts," Zahn said, arguing that a package of spending cuts and "real tax increases" would bring down gilt yields and help the government's funding needs. 

He added: "If she had done income tax, I think markets would have taken that very well. It would have said, 'OK, we have somebody who's serious about getting the budget balanced.'" 

What brokers are hoping for 

Anthony Emmerson, pictured above right, of Trinity Financial, summed up the mood: "I want to see tax changes brought in to actually encourage businesses to invest and improve rather than punish and make it more difficult to trade." 

Towe added: "For us, the key test is simple: does this Budget reduce barriers to homeownership, or does it introduce new ones?" 

Jeni Browne, pictured above left, of Mortgage Finance Brokers, is wary of the Government trying to force through unpopular policies. "I will certainly be keeping an eye for anything which is slid in quietly and, given our clients are predominantly property people, my ears will be pricked for anything which would impact them." 

Kessar Salimi, of Freedom Financial, added: “I will be looking for any changes in stamp duty and council tax as this could affect the types of properties people buy, especially if they proceed with a mansion tax. The main thing I will be looking at it how the budget is perceived as this can have an effect on interest rates.” 

The detail matters enormously. A £1.5m CGT threshold hits a completely different client base than £2m. A 0.54% tax rate creates entirely different incentives than 1%. A mansion tax that catches homes over £2m is less damaging than one kicking in at £1.5m.  

Market sentiment on details such as these will impact the bond market, which waits nervously. The market is paused. What comes next depends on where the Chancellor draws the lines—and brokers need to know those lines when clients start asking.