Budget Round-Up | Dec 1, 2025

Last week’s UK Budget delivered the most consequential tax changes for landlords in several years. Below is a clear breakdown of the headline measures - and what they mean in practice for landlords and the private rented sector.

New Higher Tax Rates on Property Income (from April 2027)

The Budget confirmed a major shift: property income will be taxed using its own, higher set of income tax bands.

New property income tax rates (from April 2027):

• Basic rate: 22% (up from 20%)
• Higher rate: 42% (up from 40%)
• Additional rate: 47% (up from 45%)

What this means in practice

• Every pound of taxable rental profit will attract 2 percentage points more tax than it does today, assuming you remain in the same band.
• For landlords already squeezed by Section 24 mortgage interest restrictions, this is another upward pressure on effective tax rates.
• HMRC has confirmed that personal allowance and reliefs will be used against other income first, with property, savings and dividends taxed last. The practical effect  is fewer opportunities to protect rental profits.

Company landlords

Companies are exempt from the new personal tax bands, but still pay corporation tax - so incorporation decisions remain case-by-case.

-----

No National Insurance on Rental Income

There had been heavy speculation that rental profits could attract National Insurance for the first time.

The Budget confirmed no NI will apply, which will be a welcome relief for many individual landlords.

-----

Visitor Levy & New Powers for Local Authorities on Short-Term Lets

The Budget continues the direction of travel set by the abolition of the Furnished Holiday Lettings regime.

Key measures

• Regional mayors and local authorities can introduce an overnight visitor levy (“tourist tax”) on hotels and short-term lets including Airbnb and serviced accommodation.
• Councils will gain additional control over how STL’s operate and how much they pay.

Why it matters

• For landlords who moved into short-term lets to improve yields, this is a good time to review the numbers to ensure they still stack up.
• STL’s will face higher operating costs and increased regulatory scrutiny.

In our view this is a direction of travel that will accelerate, with traditional lets now squeezed hard we expect to see more taxation and legislation coming for the short term market.

-----

High Value Council Tax Surcharge (“Mansion Tax”) from April 2028

A new surcharge will apply to homes valued over £2 million, starting April 2028.

Impact

• Only a small proportion of landlords are likely to be affected directly.
• Politically, this underscores a shift toward taxing wealth held in property, rather than headline income tax or NI rates.

-----

No Changes to Stamp Duty & Frozen LHA Rates

• SDLT: No changes to thresholds or the 3% additional homes surcharge.
• Local Housing Allowance: Rates remain frozen, with no uplift.

This keeps acquisition costs and affordability pressures unchanged.

-----

Making Tax Digital Still Going Ahead (from April 2026)

The Budget reaffirmed the existing timetable for MTD for Income Tax Self Assessment.

What landlords need to do

• Prepare for quarterly digital reporting
• Ensure bookkeeping software is in place well before April 2026
• Anticipate additional admin load for larger portfolios

-----

Summary

Overall, this Budget sends a clear signal that the Government believes landlords have broad enough shoulders to absorb higher taxes and tighter regulation. While that may be true for larger, well-capitalised portfolio landlords, many smaller or accidental landlords may now feel the juice is no longer worth the squeeze. The direction of travel is unmistakable: this is a continuation of the Section 24 era, rewarding professional landlords operating through company structures while individual owners face rising pressure on personal income. And for short-term let operators, the message is even clearer - expect a steadily growing burden of taxation, licensing and local authority intervention in the years ahead.