Budget Announcement: Immediate Insights for our Clients in Kensington & Chelsea
The Autumn Budget 2025 has introduced notable tax reforms that will influence the high-value property market across Kensington and Chelsea. The two headline changes are the introduction of an annual council tax surcharge on homes over £2 million, effective from April 2028, and a 2% increase in property income tax from April 2027
Mansion Tax: Council Tax Surcharge on £2m+ Properties
From 2028, properties valued above £2 million will attract an annual council tax surcharge, starting at around £2,500 and rising across bands, with homes valued above £5 million likely paying upwards of £7,500. This change is significant for Kensington and Chelsea, where many homes exceed this threshold. Buyers are expected to factor this into their purchasing decisions, and sellers may adjust pricing strategies to reflect new market sensitivities. We anticipate increased buyer demand for homes priced just below the threshold and a need for sellers of high-value homes to justify price points more clearly. The implementation timeline allows room for forward planning and repositioning.
Landlords and Investors: Focused Planning, Lasting Potential
Landlords will see property income tax rates increase by two percentage points from April 2027. While this impacts post-tax returns, Kensington and Chelsea remains a high-demand rental market. Investors with well-maintained, desirable properties can continue to command strong rents and enjoy long-term capital appreciation. As some landlords re-evaluate their positions, those who remain active and strategically aligned may benefit from reduced competition and stronger tenant retention. The rental sector in prime central London continues to offer opportunity, particularly when combined with tailored portfolio planning and efficient ownership structures.
Buyers: Confident Steps in a Dynamic Market
Despite the upcoming tax changes, the current market presents opportunities. Motivated sellers and stable mortgage rates create favourable conditions for well-prepared buyers. Properties priced under £2 million may experience growing demand, while prime homes above the threshold offer room for negotiation and long-term value. Strategic purchasing, supported by local expertise, will be key in identifying value and ensuring sustained performance in a shifting market.
Market Outlook: Adjusting, Not Contracting
We expect a period of recalibration rather than decline. Transaction volumes may remain modest in the short term, but Kensington and Chelsea continues to attract both domestic and international interest due to its unique character, amenities, and long-term investment potential.
Our View
The confirmed mansion tax is unlikely to materially affect buying decisions in the short term. Most new entrants into the £2 million-plus market are well-positioned to absorb an annual levy of this size. The greater consideration lies in what this may signal longer term. While the surcharge is modest today, it could pave the way for future increases. That said, this is not a current challenge. What matters now is that the period of uncertainty is over, and buyers, sellers, and landlords can move forward with clarity. With stable mortgage rates, pricing clarity, and months of hesitation finally behind us, we expect renewed energy in the £2m+ market. Stagnated transactions can now progress, and we anticipate a robust response as the path ahead becomes clear.
A Trusted Partner in Transition
At tlc, we are here to guide clients through each decision with insight and care. Toby is available any time to discuss the possible impact on your individual situation. You can reach him directly on 07736 345776 or via email at toby.brown@tlclondon.com.
Local. Trusted. Proven.
