With the October Budget approaching, Islay Robinson explores the property tax changes being discussed and why financing structure, timing and preparation could matter for borrowers.

The Budget is 20 days away.

On Wednesday 28 October, Chancellor John Healey will deliver his first Budget, having repeatedly talked about the need for stability and fiscal discipline. At the same time, the government's room for manoeuvre has become tighter as borrowing costs have risen and the public finances have come under greater pressure. Which?

The government has committed not to increase the main rates of income tax, VAT or employee National Insurance. That does not mean property will be untouched. It means the search for additional revenue is likely to focus elsewhere.

And for my clients, there are three areas of speculation worth paying particular attention to.

The first is the High Value Council Tax Surcharge, sometimes referred to as a mansion tax. The charge is currently planned from April 2028 for owners of residential property in England worth £2 million or more. There is now speculation that the threshold could be reduced to £1.5 million. GOV.UK

The second is stamp duty on shares in property-owning companies.

The third is Capital Gains Tax, including possible changes affecting people leaving the UK or the treatment of gains on higher-value main residences.

None of these changes is confirmed.

That distinction matters.

But the fact that they are being discussed is already influencing conversations I am having with clients.

The Share-Transfer Question Is Particularly Interesting

If I had to identify the proposal with the clearest policy logic behind it, it would be the treatment of share transfers in property-rich companies.

At present, buying a property directly and acquiring shares in a company that owns the property can produce very different transaction-tax outcomes. Osborne Clarke has specifically highlighted the possibility of extending SDLT to transfers of shares in property-rich companies, which would narrow that difference.

It is easy to understand the argument for doing so.

Two buyers could ultimately end up owning the same property, but the tax treatment can be materially different depending on the structure through which they acquire it.

The more difficult question is what happens to investment if that distinction is removed.

In a property market that is already relatively subdued, the government has to consider whether raising the tax burden on transactions could discourage investment or make deals that are marginal today simply unviable.

That is why I see this as a policy question rather than a forecast.

There is also a separate issue around the existing rule for purchases of six or more dwellings. Those acquisitions can currently fall into the non-residential SDLT regime, and Osborne Clarke has flagged the possibility that this treatment could be tightened.

For portfolio investors, that is potentially significant.

The £2 Million Threshold May Not Stay Where It Is

The High Value Council Tax Surcharge is different because it is already government policy.

From April 2028, owners of residential property in England valued at £2 million or more are due to pay an additional annual charge. The government has said the measure is expected to affect less than 1% of properties and that properties will be independently valued for the purposes of the surcharge. GOV.UK

The question now is whether the threshold remains at £2 million.

Reports that the government is considering reducing it to £1.5 million have been persistent enough that I think anyone buying or holding property around that level needs to understand the possibility, even though there is no certainty that the threshold will change. Reuters

That is particularly relevant in London, where £1.5 million does not necessarily buy what most people would consider a traditional "mansion".

It can be a family house, a flat or an investment property in an established area.

The tax question therefore becomes part of the wider investment calculation.

CGT Is Another Area Where The Rumours Matter

Capital Gains Tax is another obvious area for speculation.

Options being discussed include changes to the treatment of gains when someone leaves the UK permanently and removing or restricting CGT relief on the sale of a main residence above a particular value. Osborne Clarke has identified both as possibilities, alongside other CGT reforms.

Again, none of this is confirmed.

I am not a tax adviser, and I would not tell a client to sell, restructure or change their ownership arrangements simply because a measure has appeared in the press.

What I do tell clients is to take tax advice before making the decision.

That is particularly important because previous Budgets have included measures that take effect immediately, sometimes supported by anti-forestalling provisions. Osborne Clarke notes that previous Budgets have used this approach to prevent people from rushing transactions through simply to secure the previous tax treatment.

In other words, trying to second-guess the Chancellor at the last minute is not a strategy I would recommend.

Where I Come Into The Conversation

The tax question is for the client's accountant or tax adviser.

My role is to look at what sits behind the transaction.

Rumours do not change a lender's criteria. But they do change what clients are asking for.

I am already having conversations with people who hold property through companies and are asking whether their current structure would still make sense if the treatment of share transfers changed.

Others are considering purchases and want to understand whether completing before or after the Budget could alter the economics of the transaction.

That creates a financing question as well as a tax question.

A purchase completing before the Budget is a different transaction from one completing afterwards if the tax treatment changes. The lender needs to understand the transaction it is actually financing, particularly where the ownership structure, purchase price, deposit or repayment strategy could be affected.

The Same Applies To Sellers

Clients who are planning to sell are asking a slightly different question.

Should they try to complete before the Budget?

The answer depends on their tax position, the transaction itself and the advice they receive from their tax advisers. There is no universal answer.

My concern is what happens to the financing sitting behind the transaction.

If a seller has borrowing that needs to be repaid from the proceeds, the amount ultimately available to clear that debt can be affected by the tax treatment of the sale.

For a buyer, the issue can be even more immediate.

If their purchase depends on one transaction completing before another can proceed, a change in tax treatment could disrupt the chain. That can turn what looked like a straightforward transaction into an execution problem.

This is where I think financing discipline matters.

Timing Can Expose Weaknesses In A Deal

A mortgage or bridging loan can sometimes be valued, documented and completed within weeks, but only if the structure is clear from the beginning, and timescales vary and are not guaranteed.

Short-term finance is where execution risk tends to show up fastest.

If the repayment strategy depends on selling another property, the lender needs to understand that from day one. If the sale proceeds could be affected by a change in tax treatment, that needs to be factored into the assessment rather than discovered halfway through the transaction.

The same principle applies to ownership structures.

If you expect the structure of a transaction to change, tell the lender and broker at the start.

Do not build a financing strategy around one structure and then assume it can simply be switched to another after an offer has been made.

Lenders differ in how they approach changes to the transaction. Some may re-underwrite the case. Others may not proceed.

That is why I think lender selection matters more when the underlying transaction is complicated.

At Enness, we work with more than 1,000 lenders, and the relevant question is not simply who offers the lowest rate. It is which lender is comfortable with the borrower, the property, the ownership structure and the proposed exit.

My View

There are 20 days to go until the Budget.

That is enough time for plenty more speculation, but not enough time to justify making a major property decision based on every rumour that appears in the press.

The £2 million surcharge is already planned. The possibility of a £1.5 million threshold is not confirmed. The treatment of property-company share transfers is being discussed. CGT changes remain possible. None of those things should be treated as a done deal.

What I think is more useful is to ask a different question.

If the rules changed, would the transaction you are considering still work?

If the answer is yes, you are in a much stronger position.

If the answer is no, that does not necessarily mean you should abandon the transaction. It means you should understand the consequences before committing to it.

For borrowers, the financing needs to work alongside the tax and ownership structure, not separately from it.

The Budget will tell us what is actually changing.

Until then, I would rather see clients properly prepared for several possible outcomes than trying to predict which rumour will become policy.

The statement is on 28 October. The High Value Council Tax Surcharge is currently scheduled to begin in April 2028.

Between now and then, there is a lot of noise.

For property transactions, the important thing is making sure the financing can withstand it.

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Risk warning: Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Bridging finance is short-term and may not be suitable for your circumstances.

General information: This article is for general information only and does not constitute personal financial, mortgage or tax advice. Budget measures discussed are speculative until announced. Lending decisions, rates and terms are subject to individual circumstances and lender criteria. Enness does not provide tax, legal or investment advice; seek independent tax advice before making decisions.