5 Tax Changes Every Homeowner Should Prepare for This Year

Owning a home is one of the most significant financial commitments many UK taxpayers will ever make. For salaried employees in the UK, keeping on top of tax developments—especially those affecting homeowners—can have a big impact not just on your monthly budgeting but also on your long-term financial planning. Below are five major tax changes that homeowners should be aware of this year, along with practical tips on how to ensure you’re prepared in terms of saving, investments, debt management, pensions and emergency planning.

1. Reform of Property Tax – Stamp Duty, Council Tax and Possible New Annual Charges

One area gathering considerable attention in recent months is property tax. Several reports suggest that the government is actively reviewing how homeowners are taxed via Stamp Duty Land Tax (SDLT), Council Tax and the possibility of a new annual levy on higher-value properties.

For example, research by the HomeOwners Alliance suggests that one model under review could replace SDLT with a national property tax on homes worth more than £500,000, with an annual rate of around 0.54% and a supplement for values over £1 million.

Why this matters to salaried homeowners

• If you plan to move home, buy a higher-value property or currently own a home in a region where values are high (e.g., London or the South East), you may face significantly higher costs.

• For many, existing taxes are already a burden; the introduction of a new annual levy would further affect affordability and may impact cash-flow and future decisions (for example around downsizing or moving).

• Even if you do not buy or move, the prospect of an annual tax can affect your budgeting or decisions about whether to stay put, renovate or sell.

Practical financial tips

• Budget for higher fixed costs. If you own a property, build in a buffer for potential future tax rises. A rolling “tax-shock” fund (see Section 5) that covers a few months of additional payments is wise.

• Consider timing of any move. If you’re thinking of selling or buying, weigh the potential tax implications of any reform announcements. Waiting until after full clarity might be prudent.

• Keep an eye on valuations. Higher-value homes may face the greatest exposure—monitor your home’s estimated market value and the tax bands that may apply.

• Cash-flow stress test. Run a scenario: “If my monthly cost went up by X per cent due to tax changes, could I absorb that within my salary and savings?”

• Engage professional advice. If you own a higher-value property or expect to move, getting tailored advice from a tax-specialist (for example via a service such as My Tax Accountant) may help clarify your exposure.

2. Capital Gains Tax (CGT) and Main Residence Relief Changes

For many homeowners, one of the most attractive features of owning a home has been the exemption from CGT on the sale of a primary residence (via Private Residence Relief). However, that exemption is under scrutiny. Analysts note that the exemption could be scaled back or removed for higher-value homes, with reports pointing to possible measures affecting homes sold for more than £1.5 million.

Also, the rates of CGT were increased in October 2024: for non-property assets the lower rate moved from 10% to 18% and the higher rate from 20% to 24%. Blevins Franks Although these specific increases relate to non-property assets, the trend signals a willingness to raise CGT more generally.

Why this matters

• If you plan to sell your home and migrate to the next stage of life (e.g., downsizing, retirement), a future CGT liability could significantly reduce your net proceeds.

• Even if you don’t sell, any change in relief may reduce the “safe-haven” appeal of home ownership for tax-planning purposes.

• For those owning second homes or rental properties, the higher CGT rates and potential extension of reliefs are particularly relevant.

Practical financial tips

• Plan ahead for exit strategy. If you anticipate selling your home in the next few years, work out projected sale proceeds and what tax may apply under possible new rules.

• Use the time-value of money. Given that changes may happen, early planning gives you more flexibility to respond (for example, selling earlier or restructuring ownership).

• Explore alternative tax-efficient assets. In light of possible reduced home-sale relief, ensure your investment portfolio is balanced (see Section 4).

• Keep meticulous records. Purchase price, improvement costs, dates of occupancy — these all matter in calculating any future CGT liability.

• Consult tax advice. Changes to reliefs can be complex and overlap with probate, inheritance tax and estate planning.

3. Inheritance Tax (IHT) and Pension Inclusion

Inheritance tax remains a concern for many middle-income homeowners, especially as property values rise and tax thresholds remain frozen. A particularly significant change on the horizon is the inclusion of pension pots for IHT from 6 April 2027.

At present, defined contribution pension funds are largely outside the taxable estate for IHT. After April 2027, they will generally count as part of the estate and could be taxed accordingly (at 40% above allowances).

Why this matters

• Homeowners who rely on their pension and home equity to build a legacy may suddenly face higher tax exposure at death.

• Those in cohabiting relationships (rather than married/civil partnership) may face additional tax disadvantages, since spousal transferable allowances may not apply.

• Property value and pension value combined may push estates into the IHT net, even if one alone would not.

• It affects estate planning and early decision-making (for example, how to draw pension, how to structure ownership, gifts, trusts).

Practical financial tips

• Review your estate plan now. Begin to project your combined estate value (home + pension + investments) to see whether you exceed the IHT threshold (currently £325,000 + residence nil-rate band).

• Consider early pension draw-down or legacy planning. If you’re close to exceeding thresholds, drawing some pension funds earlier (and reinvesting in other tax-efficient vehicles) may reduce future IHT exposure — but only with proper advice.

• Use gift allowances carefully. Gifts made more than seven years before death may escape IHT; however, you must not impair your own financial security.

• Ensure your ownership structure is tax-efficient. Joint ownership, trusts and nominated beneficiaries all have implications for IHT.

• Maintain an emergency/contingency fund. Avoid having to liquidate assets (such as your home) under pressure just to pay tax bills.

4. Income Tax and National Insurance: “Stealth Taxes” for Homeowners

Although headline income tax rates may remain unchanged, one of the most significant risks to homeowners is the “stealth tax” of frozen thresholds—meaning more of your income becomes taxable as wages rise, even without a formal rate increase. For example, the personal allowance and higher-rate thresholds in the 2025/26 tax year remain frozen until at least 2028.

Other measures under consideration include curbing salary-sacrifice pension arrangements, restricting tax relief on pensions for higher earners, or even adjusting National Insurance.

Why this matters for salaried homeowners

• If mortgage payments, insurance and maintenance costs rise, having a larger portion of income taxed erodes your net take-home pay and cash-flow cushion.

• Many homeowners rely on salary sacrifice arrangements (e.g., higher pension contributions) as part of their strategy — changes here could increase your tax burden and reduce flexibility.

• A squeezed budget can make it harder to save for emergencies, upgrade or maintain your home, or invest for the future.

Practical financial tips

• Re-evaluate your budget annually. Ensure you understand your net pay, especially after salary increases and inflation, and check how much you carry forward into savings, debt reduction and home maintenance.

• Maximise pension and ISA benefits. Even if tax relief is under review, continuing disciplined saving through pensions and ISAs remains important for long-term security.

• Manage debt cautiously. A higher tax bite means you should avoid over-reliance on variable debt. Keep mortgage payments, credit-cards and other debt within comfortable margins.

• Plan for insurance and maintenance. Property ownership involves unexpected costs (repairs, boiler, roof, etc.). Build an annual “home maintenance fund” and treat it like a fixed cost.

• Use salary sacrifice wisely. If your employer offers pension salary-sacrifice or other tax-efficient benefits, review them regularly with a view to how tax changes may affect value.

5. Building Financial Resilience: Savings, Budgeting, Debt Management & Long-Term Planning

Tax changes may feel abstract, but they impact your day-to-day finances and long-term goals — especially as a homeowner. Rather than simply reacting to each tax announcement, proactively building financial resilience gives you flexibility and security.

Budgeting and Emergency Savings

• As a homeowner, your fixed costs (mortgage/rent, insurance, council tax, maintenance) are higher and less flexible than a renter’s. Make sure your budget includes a dedicated “home cost” category.

• Build an emergency fund equal to at least 3–6 months of outgoings, and preferably 6–12 months if you have variable income or expect major maintenance (e.g., roof, boiler).

• Periodically review your budget for stress-testing: “What happens if taxes rise by £100/month?” and “What if interest rates increase?” This helps you identify how much flexibility you have.

Saving and Investment Strategy

• Use tax-efficient wrappers such as ISAs (Individual Savings Accounts) and workplace pensions. Even if reliefs change, these remain core vehicles.

• Diversify: don’t put all your savings into the home. While home equity is important, mixing in investments gives you mobility and flexibility.

• Consider reviewing your investment risk profile: as a homeowner your capital is already tied up in bricks. Balance this with liquid investments or funds you can access if needed.

Debt Management

• Prioritise paying down high-interest debt (credit cards, unsecured loans) before accelerating lower-interest mortgage payments — unless your mortgage rate is exceptionally high.

• If you have a variable-rate mortgage, consider whether switching to a fixed rate makes sense, especially in a climate where taxes and costs may rise and your budget may get tighter.

• Avoid over-leveraging against the home. If tax or maintenance costs increase, you want to maintain financial flexibility rather than being forced into asset sales.

Pension and Retirement Planning

• Even if your home is your main asset, your pension matters. With changes to pension-linked taxes (see Section 3), neglecting pension planning could leave a big gap.

• Consider when you intend to retire, what income you’ll need, and how much of that income tax may bite. If part of your retirement plan is downsizing the home, be sure to include tax and cost of moving in that calculation.

• Use your workplace pension and personal pension options to automate savings. Regular contributions smooth market volatility and ensure long-term growth.

Reviewing Ownership and Legacy

• Ensure your will, probate arrangements, property ownership deeds, mortgage and life insurance are all up to date. These may interact with tax changes (inheritance, residence reliefs, pension inclusion).

• If you currently plan on leaving your home to children or other beneficiaries, think about how tax changes may impact that plan. Might you downsize earlier, release equity for gifting, or hold property differently (e.g., as joint tenants)?

• Consider speaking to a tax-specialist or independent adviser to integrate home, pension, investment and legacy planning in one cohesive strategy.

Bringing It All Together

For the typical salaried employee homeowner in the UK, the landscape is shifting. The five tax changes outlined above highlight the importance of staying ahead of policy developments and building robust financial habits rather than reacting when changes bite.

Here’s a checklist to consider:

1. Audit your budget now — update your figures for net income, fixed housing costs, maintenance buffer and savings rate.

2. Stress-test for tax-shock — ask, “If my housing-related tax costs rose by £200/month, could I manage?”

3. Save and invest diligently — keep contributing to your pension and ISAs, diversify away from relying solely on your home equity.

4. Manage debt carefully — don’t assume future tax or cost increases won’t impact you. Avoid being over-leveraged.

5. Get ahead with estate/pension planning — property tax reform, CGT changes and pension-inheritance tax shifts all make this more important than ever.

6. Stay informed and review annually — tax rules evolve, thresholds freeze, and policies change. Having a trusted advisor reachable (for example via the hyperlink above) is a wise move.

Final Thoughts

Home ownership brings rewards, but also responsibilities—financial and tax-related. For salaried employees in the UK, it’s not enough simply to budget for the mortgage; you need to anticipate rising costs, potential tax changes and how they interplay with retirement, savings and legacy planning.

By viewing your home as part of a broader financial ecosystem (rather than just the roof over your head), you’ll be better placed to absorb change, maintain flexibility and achieve your long-term goals. The combined forces of property-tax reform, CGT shifts, inheritance tax developments, income-tax burden and general cost-of-living pressures mean that the most effective strategy is one built on prudence, review and early action.

While none of the developments may take immediate effect, their implications could be far reaching. Make this year the year you looked at the full picture: home, finances and future. It’s not just about what you pay today—but about where you will be in five, ten or twenty years.