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14/7/25 8:13 pm
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When I wrote in October about ‘what to watch for’ in the Autumn Budget, the big unknowns were new taxes on rental profits, potential Capital Gains Tax (CGT) reform and whether landlords would face yet another reporting burden on top of Making Tax Digital.
We now have the detail. Chancellor Rachel Reeves has stopped short of adding National Insurance to rental income, a key fear for many landlords, but she has still targeted property income through higher tax rates and a new annual charge on high-value homes.
At the same time, there was nothing on Local Housing Allowance (LHA), Stamp Duty Land Tax (SDLT) or the cost of making homes greener, despite strong lobbying from landlord bodies.
Key measures at a glace
For landlords and the wider private rented sector, the key announcements are:
No National Insurance on rental income, speculation about an NI charge on landlord profits has not turned into policy in this Budget
A 2% increase in income tax rates on property income from April 2027, with new separate ‘property’ tax bands of 22%, 42% and 47%
A new High Value Council Tax Surcharge – widely dubbed a mansion tax – on homes worth more than £2 million in England from April 2028
New powers for regional mayors and local authorities to introduce an overnight visitor levy on short-term and holiday lets
No changes to Stamp Duty in England and no uplift to Local Housing Allowance (LHA) rates, which remain frozen
Alongside this, the existing timetable for Making Tax Digital for Income Tax (MTD ITSA) which will start phasing in from April 2026 remains in place.
The most important change for most individual landlords sits in a fairly technical HMRC note. From April 2027, property income will be taxed using separate, higher rates than other income.
The new rates for property income are:
basic rate: 22% (up from 20%)
higher rate: 42% (up from 40%)
additional rate: 47% (up from 45%)
In practice, that means:
If you hold your properties in your own name, every pound of taxable rental profit you earn after April 2027 will attract 2 percentage points more income tax than it does today, assuming the same band
If you’re already squeezed by Section 24 mortgage interest restrictions, this is another layer pushing up your effective tax rate on property income over time
The same HMRC note also confirms that certain reliefs and allowances will now be set against other income first, with property, savings and dividend income coming last in the calculation. That sounds dry, but the effect is simple, fewer opportunities to shelter rental profits within your personal allowance or other reliefs.
Company landlords aren’t hit by the new personal tax rates, but they still pay corporation tax, so it’s not completely straightforward. This will add fresh weight to the “incorporate or not?” conversation many landlords are already having with their advisers.
For short-term and holiday let landlords, Budget 2025 continues a trend that started with the decision to abolish the Furnished Holiday Lettings tax regime from April 2025.
Today’s measures give mayors and local councils the power to introduce an overnight visitor levy, in effect, a tourist tax, on hotel stays and short-term lets such as serviced accommodation and Airbnb-style properties.
For landlords who have moved into short-term lets to try to improve yields, this is another nudge to re-run the numbers and check whether the model still stacks up.
The widely trailed mansion tax has arrived in the form of a High Value Council Tax Surcharge from April 2028.
Only a small slice of landlords will be caught directly, mainly those holding very high-value single properties or small portfolios in London and the South East. But politically, it underlines the broader shift towards taxing wealth held in property rather than, say, headline rates of Income Tax, NI or VAT.
LandlordZONE will be unpacking the detail of the Red Book, HMRC technical notes and industry reaction over the coming days, including what this means for portfolio planning, incorporation decisions and regional differences. If you want to stay on top of the moving pieces, make sure you’re signed up to our newsletter and keep an eye on the tax and regulation sections of the site.
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