Budget 2025: UK Property Taxes Increase — Is It Time to Look to France?

The latest UK Budget continues a clear direction of travel: raising more revenue from wealth and assets, especially property, while leaving previously announced tax rises for landlords and second-home owners firmly in place.

For UK investors who already feel squeezed by higher Stamp Duty, reduced mortgage interest relief and rising running costs, the message is simple: owning investment property in the UK is getting more expensive — particularly at higher price points.

By contrast, France continues to offer targeted incentives for investors in new-build property, especially in prime locations such as the French Alps and French Riviera. Lower purchase costs on new builds and the ability to reclaim 20% VAT under the Para-Hotelier regime can significantly improve net returns compared with equivalent investments in the UK.

This article looks at the key Budget 2025 changes affecting UK real estate investors and why many are now considering reallocating part of their portfolio to France.

The 2025 Budget keeps all recent Stamp Duty Land Tax (SDLT) changes in place, including the higher rates for second homes and the lower SDLT thresholds that took effect from April 2025. For additional residential properties in England, the current rates are:

These rates apply to each slice of the purchase price within the band. Non-UK residents may pay an additional 2% surcharge on top of these rates.

The UK applies Stamp Duty at progressively higher rates, while France uses a far simpler and lower purchase tax system. New-build properties attract around 0.7%, and existing homes around 5.8%, creating a clear cost advantage for buyers looking to invest in France.

From April 2028, a new High Value Council Tax Surcharge (HVCTS) will apply to residential properties in England worth £2 million or more. The surcharge will start at £2,500 per year, rising to £7,500 for properties valued above £5 million, and will apply to owners in addition to existing council tax.

From April 2027, the UK will introduce higher property-income tax bands, with each rate increasing by 2%. France, meanwhile, allows investors to depreciate about 80% of the property’s value and deduct mortgage interest and expenses, meaning rental income can be effectively tax-free for up to 30 years.

In the UK, second-home and investment properties are subject to Capital Gains Tax at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, regardless of how long the property has been owned.France applies a flat 19% CGT rate, but offers generous taper relief—meaning the taxable gain reduces every year of ownership. After 22 years, the CGT liability reduces to 0%, making long-term ownership far more attractive than in the UK.

Combined with lower stamp duty, lower income tax on rental income and capital gains tax that tapers down to 0%, France also offers several government-backed tax incentives aimed at encouraging investment in new-build, furnished rental properties.

These incentives can significantly reduce the upfront cost of purchase and improve the tax efficiency of owning a property in France.

Under the Para-Hôtelier regime, qualifying owners of new-build furnished properties rented on a serviced, short-stay basis (e.g. AirBnB) can reclaim the full 20% VAT paid on the purchase price.

This incentive significantly reduces the effective cost of a new-build:

New-build properties in France also benefit from an exemption from Taxe Foncière (the French equivalent of council tax) for the first two years after completion, subject to local authority confirmation.

This provides an additional early-stage saving on top of the VAT rebate.

The direction of UK policy points toward higher ongoing costs for property owners, whereas France is moving the opposite way by supporting well-structured investment in new-build homes. 

For many investors, the decision is no longer simply “Should I buy another UK property?” but rather “Is now the right time to diversify into France instead?”

As the gap between the two markets widens, the question becomes less about short-term tax differences and more about which environment offers the clearer, more stable long-term position — and increasingly, that case is being made in France.

*Disclaimer: This article provides general information only and does not constitute tax, legal or financial advice. Figures, examples and tax treatments may vary depending on personal circumstances and may change over time. Readers should seek independent professional advice before taking any action.

For investors thinking about diversifying into France, the next step is understanding how the opportunity fits with your wider portfolio. Our team can walk you through regional options, available financing for non-residents, the relevant French tax frameworks and how best to structure long-term ownership.

If you’d like tailored advice based on your goals:

If you prefer to start with a quick, clear overview, you can also register for our How to Buy Property in France webinar.

In under 30 minutes, you’ll learn the real French buying process, how mortgages work for UK residents, the ownership structures available, key tax incentives, and real case studies of how we’ve helped clients successfully buy their dream homes in France.