Chancellor John Healey’s first Budget was centred on providing some immediate relief for households and businesses, while laying the foundations for longer-term economic growth. Against a challenging global backdrop, the emphasis was firmly on stability and giving families and businesses greater breathing space in the months ahead.
By the standards of recent years, this was a less dramatic Budget than some feared, with stability and market reassurance taking priority over bold new measures.
The housing market received some welcome support through the Your First Home scheme, designed to help more first-time buyers and encourage housebuilding. However, a further two percentage point increase in tax on property income, on top of the rise announced last year, will take effect next April.
Otherwise, there was little to move the dial, with more significant reforms likely to come with the government’s ten-year plan next year.
Key policy announcements
- Your First Home scheme: From February 2027, eligible first-time buyers purchasing a new-build home will be able to access a government equity loan of up to 20%, backed by £4.7bn of funding. Household income will be capped at £110,000 outside London and £140,000 in London, with buyers contributing a minimum 2.5% deposit. The equity loan will be interest-free for the first five years and the scheme is expected to support around 70,000 households.
- First Time Buyer ISA: A new First Time Buyer ISA will replace the Lifetime ISA, retaining government support for those saving towards their first home. The Government has also announced changes to the LISA withdrawal penalty for those buying above the existing £450,000 property limit.
- Property income tax rise: From April 2027, income tax rates on UK property income will increase by four percentage points in total, comprising the two percentage point rise announced in the 2025 Budget and a further two percentage point increase announced in the October 2026 Autumn Budget.
- Building regulations: The Government has committed to no further major changes to residential building regulations during the remainder of this Parliament, except where required to improve building safety.
- Social and affordable housing: Further support has been announced for social and affordable housing, alongside measures intended to tackle homelessness and rough sleeping. Land sold to social housing providers will also benefit from a VAT exemption.
- Household energy support: Around 20 million households in Council Tax bands A-D in England are set to receive a £100 Household Energy Payment in 2027.
- Energy bills: The temporary VAT reduction on domestic electricity will be extended until July 2027, while gas standing charges are set to be removed as part of wider reforms to household energy costs.
- Bank surcharge: The Bank Corporation Tax Surcharge will temporarily increase from 3% to 6% to help fund household energy support.
- Fiscal devolution: Regional leaders will begin retaining a greater proportion of locally generated business rates, starting at 20% next year and rising to 100% by the end of the decade.
- Fiscal rules: The Government reiterated its commitment to fiscal discipline, reducing borrowing and maintaining a buffer against economic uncertainty.
Polly Ogden Duffy, Managing Director of John D Wood & Co., shares her insights:
“Thankfully, the outcome of this Budget feels less alarming than some of the scenarios the property industry had been preparing for. The introduction of the Your First Home scheme is a positive step towards helping more first time buyers onto the property ladder. If successful, it could help stimulate activity at the entry level of the market, with a positive knock on effect for property chains across the country, whatever the price point.
What the market really needs is for buyers and sellers to feel confident making decisions, and this depends on Government providing a stable economic environment that helps keep mortgage rates in check. The prospect of a mansion tax threshold of £1.5m had been a particular concern for London, bringing a far greater proportion of properties into scope than in other parts of the country. With this now off the table, the industry can breathe a sigh of relief.
However, the longer term challenge of reinvigorating market activity remains. We continue to advocate reform of Stamp Duty, which remains a significant barrier to people moving home – removing it would help to encourage downsizers and free up larger family homes which are often underoccupied. The cost of transacting can prevent homeowners from making their next move, restricting mobility and stifling activity across the market. Meaningful reform would be a positive step towards unlocking transactions and giving buyers and sellers greater confidence to act.
Ultimately, confidence is what the market needs most, and the real question is whether Healey and Burnham have done enough to restore it in an already subdued market. Time will tell.”
