The Proposal

Chancellor Rachel Reeves has signalled that property taxation is under review as the government looks to plug a £40–51 billion budget gap. Among the options being discussed are:

• An annual property tax – based on current house values, replacing or sitting alongside council tax. This would mean owners of second homes face a new bill every year, regardless of how often they use the property.

• Higher capital gains tax (CGT) on expensive properties – second homes already attract CGT when sold, but Reeves is considering tightening the rules further, so owners pay more when they eventually cash in.

• Council tax reform – potentially replacing outdated 1990s valuation bands with charges based on today’s values. Areas with lots of second homes could see bills rise sharply.

The Autumn Budget is expected to clarify which of these ideas will move forward.

 

The Implications for Second-Home Owners

Higher Running Costs

Owning a second property is already an expensive commitment — with council tax, utilities, insurance, and maintenance costs to think about, even if the home sits empty for long stretches. If a new annual property tax is introduced on top of existing charges, or if council tax is recalculated at today’s property values, running costs could jump by thousands of pounds a year.

Pressure to Sell or Downsize

A sharp rise in costs could push more second-home owners to sell. This might be especially true for those who inherited a property but don’t want to let it out, or families keeping hold of a holiday cottage out of tradition. Even if the property holds sentimental value, ongoing taxes and rising bills could make keeping it unaffordable.

 

Case Studies

• For landlords, new costs could make it harder to balance the books, especially for those using property as a long-term pension plan.
• For holiday-let owners, in many tourist hotspots, councils already charge a premium on council tax for second homes, sometimes up to double the normal rate. If Reeves’s property tax reforms are layered on top of those surcharges, the cost of keeping a second home in places like Cornwall, Devon, or the Lake District could become prohibitively high.
• For families who inherit property, keeping hold of a second home may become an unaffordable luxury.

 

Why It Makes Sense To Act Sooner Than Later

The real danger lies in timing. If capital gains tax is increased on second homes, anyone waiting to sell could face a far larger tax bill than they would today. That means the value locked in a second property could be eroded overnight by new rules announced in the Budget.

Second home owners  who are already questioning whether a second home is affordable should pay close attention. Waiting too long could mean being hit not just with higher running costs, but with a heavier tax bill when it finally comes time to sell.

Delaying a sale or completing too slowly could mean paying thousands more in tax if rates rise.

 

 

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