Budget delivers a sting in the tail for landlords. What does it mean for you?

The Chancellor, John Healey, has announced a second rise in tax on property income in as many Budgets. From April 2027, rates go up by a further two percentage points, on top of the rise announced last year. Here’s what it means for you.

If you own your rental properties personally, your rental profits are expected to be taxed at 24%, 44% and 49% from April 2027, four points higher than today. Dividends and employment income weren’t touched.

What’s changing

These rates are as reported in the press after the Budget. Full details are still to be confirmed.

What it costs you

Four extra points means £400 more tax a year on every £10,000 of rental profit, whichever band you’re in. If you have a mortgage, that’s before any change to your interest relief, which is still a basic rate tax credit rather than a full deduction.

What didn’t change

Industry reaction notes there was no increase in Capital Gains Tax, and the high value council tax threshold stays at £2 million. Tax on dividends and on employment income also stayed the same, which matters if you hold property through a company.

What to do now

Don’t act in a hurry, but don’t ignore it either. Work out what 24%, 44% or 49% does to each property’s profit once April 2027 arrives, and whether the numbers still work.

If you’re thinking about buying, how you hold the property matters more than ever. Given the recent tax changes, buying through a limited company appears to be the best route: company profits aren’t taxed at the new property income rates, and company landlords can still deduct their mortgage interest in full. It isn’t right for everyone, and moving existing properties into a company can trigger tax bills of its own, so speak to an accountant before you act.

The bottom line

A second tax rise is a blow, but it isn’t the end of the story. Landlords who plan ahead, work out the numbers property by property and choose the right way to hold their properties can still make buy to let work, particularly in the North East, where rents are rising faster than anywhere else in England and yields are well above London’s.

Watch on YouTube: https://youtube.com/shorts/ZveableViHA