Autumn budget 101: The new rules reshaping London property

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Whether you own a single investment flat in Fulham or manage a multimillion-pound portfolio across Kensington, Marylebone and Notting Hill, understanding this Autumn Budget is no longer optional. It is essential.

In this in-depth editorial, we break down what changed, why it matters, and how London property owners can build a strategy that is resilient, tax-efficient and positioned for the next decade—not just the next cycle.

One of the most consequential announcements is also one of the quietest: Income tax thresholds will remain frozen until 2031.

This freeze means millions will gradually drift into higher tax brackets even if wages only rise modestly. It’s a phenomenon economists call “fiscal drag.” And in London, where salaries often increase faster than national averages, the impact will be even more pronounced.

Why this matters for the London housing market

According to the report, lenders will adjust affordability assessments because homebuyers will experience:

• Reduced disposable income after tax
• Tighter debt-to-income calculations
• More conservative mortgage stress testing
• A preference for homes with lower ongoing running costs (EPC, service charges, council tax) 

In other words, even if mortgage rates fall in late 2025 or 2026, borrowing power may not fully recover if tax pressure increases in the background.

For landlords, the Autumn Budget confirms an unmistakable shift: Taxes on savings, dividends and property income will rise from 2027.

This will directly compress net rental yields, especially for:

• Older Victorian and period properties with high maintenance
• Flats with rising service charges
• High-mortgage landlords carrying leverage
• Landlords with portfolios in lower-yield postcodes

The Autumn Budget report notes that many investors may respond by:

• Disposing of weaker or low-yielding units
• Deleveraging to reduce interest exposure
• Reinvesting into resilient, energy-efficient homes that are easier to let and cheaper to maintain

The key question for London landlords now is:

“Is my current rental portfolio still performing after tax?”- not just before.

One of the most widely discussed Autumn Budget headlines is the upcoming: Annual levy on homes valued above £2 million starting in 2028.

While the specifics are yet to be finalised, the direction is clear: Prime London property owners will face higher long-term holding costs.

How this may reshape buyer behaviour in Prime Central London

• Buyers may cap budgets just shy of £2m
• Properties priced at £1.7m–£1.99m could see increased demand
• Owners of £2m–£5m homes may reassess whether to hold, refinance or restructure
• Buyers may pay closer attention to long-term running costs and EPC ratings

This is not expected to cool the prime market, but it will make buyers more strategic, analytical and value-focused.

The central thesis of Autumn Budget 101 is philosophical as much as financial: The winning investors of the next decade are not those with the most properties

but those with the most resilient ones.

According to the guide, this means restructuring portfolios with four key principles:

(1) Release Weak Links

Properties where:

• Net yield is declining
• Service charge inflation outpaces rent
• EPC upgrades would be disproportionately expensive
• Tenant demand is softening

These assets may no longer justify capital tied up.

(2) Upgrade Core Holdings

Improving your strongest properties, presentation, EPC rating, layout efficiency can:

• Defend rental income
• Reduce void periods
• Improve long-term resale value
• Attract higher-quality tenants

(3) Rebalance Toward Strong Fundamentals

The report encourages shifting focus toward properties with:

• Excellent transport access
• Lower running costs
• Broad tenant/buyer appeal
• Resilience to future regulation

(4) Think 5–10 Years Ahead

With rising taxes, shifting regulation (including Renters’ Rights Bill) and changing tenant expectations, investors must position ahead of the curve—not react to annual headlines.

5. Mortgage Affordability: Why 2025–2030 Buyers need a New Strategy

Even if interest rates fall through 2025–2026, borrowers now face a dual pressure:

1. Frozen tax thresholds reducing take-home income
2. Stricter affordability models by lenders

Combined, this could impact:

• Maximum borrowing loan-to-income (LTI) ratios
• Mortgage product eligibility
• Appetite for homes requiring additional renovation cost

How buyers evaluate long-term affordability

• Renewed interest in high-efficiency, well-insulated homes
• More buyers looking at “emerging prime” areas like Kensal Rise, Brook Green, Chiswick
• Higher competition for properties just under major tax thresholds

With rising tax pressure (2027), stricter compliance (Renters’ Rights Act), and the new levy (2028), London landlords will need to evaluate:

• Whether to incorporate
• Whether to sell low-yield units
• Whether to refine before levy impact
• Whether to reinvest in higher-demand segments
• Whether EPC upgrades are cost-effective

This is particularly critical for owners of:

• Victorian terraces with insulation challenges
• Flats with older communal heating
• Properties with high service charge structures
• Non-managed assets suffering from voids

PCL markets such as Kensington, Chelsea, Holland Park, Marylebone, have always been tax-sensitive. Even modest adjustments in annual costs can influence buying psychology.

Our forecast:

• £1.5m–£2m homes may outperform
• Demand for £2m–£3m homes may temporarily slow but rebalance as global buyers return
• Properties with strong fundamentals (sunlight, layout, EPC B/C, lateral space) will retain premium pricing
• Under-invested PCL stock may underperform unless upgraded

A successful strategy in the post-Autumn Budget environment will require:

✔ A portfolio review

✔ A tax-efficient holding structure

✔ A plan for EPC and compliance

✔ A review of rental yield vs. mortgage leverage

✔ A long-term view on which assets deserve reinvestment

London remains one of the world’s most resilient real estate markets, but the next 10 years will favour the well-prepared, not the passive.

The final page of the Autumn Budget 101 summarises it perfectly:
This moment is not about panic; it is about planning. London property owners who act now will benefit disproportionately over the coming decade.

At Druce, we specialise in guiding property owners through complex market shifts.

Whether you hold a £500k rental flat or a £10m PCL portfolio, our senior advisors can help you:

• Assess your tax exposure
• Benchmark your properties against market performance
• Identify which assets to hold, upgrade or release
• Re-build a future-proofed strategy for London property

Book Your Confidential Portfolio Strategy Review

[email protected]
 +44 207 183 6592

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