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11/12/25 3:00 pm
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It has been a while since landlords could heave a sigh of relief at the end of a Budget speech and this one was no different, sadly.
I remember a time when drinkers would routinely bemoan the latest increase in beer duty – these days it is property owners that routinely count the cost.
The only good news is that between past reductions in interest relief, increases in red tape and regulation, stamp duty, interest rates, tenant rights and the almost complete absence of serious capital growth, the number of private landlords affected by each subsequent tax increase is diminished as more and more are driven out of the market.
So, what did Rachel Reeves have in her red box this time? Well, if you were watching the news in the run up we had all sorts of rumours – from the imposition of national insurance on rental income to the introduction of a wealth tax targeted at expensive properties and just about everything in between. In the end what we got was in many ways more mundane.
Just the two attacks on property owners this time around – a new council tax surcharge imposed on all property valued in excess of £2 million from 2028. For now that affects only a relatively small number of people, but past experience suggests that the threshold at which this new rate kicks in won’t stay at £2 million forever.
In a few years expect more and more people to be dragged into paying this – and likely the surcharge itself won’t stay at the current relatively modest rates (£2,500 for properties up to £5 million and £7,500 thereafter).
The second attack came in the form of a new 2% increase in income tax rates for all property income. I have heard many commentators suggest that it could have been a lot worse, but when you factor in the changes to interest relief, this is a 2% tax increase not just on the net income on property but on the income before mortgage relief. The effect, therefore, particularly on the highly geared – who have already been hardest hit by past changes - will likely be profound, drive more landlords from the market and increase the advantages available to corporate landlords.
A small private landlord employed in a job earning £95,000. He/she receives rents of £45,000 on three buy-to-lets and has costs associated with those of £7,000. Additionally, mortgage interest of £30,000 is paid meaning that the real property income is just £8,000 per annum even without capital repayments on their mortgages.
The tax due on the £8,000 rental income is currently £14,621, a tax rate of 183%. The Budget will increase the tax payable to £15,381 – a rate of 192%. You can only assume that 183% was deemed to be too generous to landlords!
Chancellors love to talk about how their changes are “fair” – I can’t imagine too many people would agree with that if they understood the numbers.
The obvious next question is what can you do about it? Often the answer is that options are limited but it is always worth getting expert advice in case your circumstances lend themselves to a different outcome.
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