The Budget landed on 28th October, and for landlords the headline is not a comfortable one. Chancellor John Healey confirmed a further rise in the tax charged on rental income, on top of the increase already announced in the previous Budget. Here is what has actually been confirmed, what it could mean for your numbers, and the sensible steps to take before April.
What was announced
From 6th April 2027, the rates of income tax on property income in England, Wales and Northern Ireland will be:
- Basic rate: 24%
- Higher rate: 44%
- Additional rate: 49%
That is a rise of four percentage points on today's 20%, 40% and 45%. Two points were already due from the earlier Budget (taking rates to 22%, 42% and 47%), and the latest announcement adds another two. Scotland sets its own income tax rates, so Scottish landlords should check what applies to them. As with any Budget measure, the rates still need to pass through Parliament in the Finance Bill, so keep an eye on the final legislation.
Two details are worth knowing:
- Mortgage interest relief: individual landlords with finance costs are reported to receive their relief at 24% from April 2027, whatever their tax band.
- Limited companies: these pay corporation tax rather than income tax, so the new property rates do not apply to them directly.
If you want the background to this one, our preview of what landlords should watch in the Budget covers the speculation that came before the announcement.
What it means in pounds
Numbers make this easier to picture. These are simple illustrations, not tax advice, and they ignore allowances and other income.
A basic-rate landlord
Say you have £10,000 of taxable rental profit after allowable expenses. At 20% the bill is £2,000. At 24% it is £2,400, so you are £400 a year worse off.
A higher-rate landlord
With the same £10,000 of profit, tax at 40% is £4,000. At 44% it is £4,400, again £400 more. The cost grows in line with your profit, so a landlord with several properties will feel it more.
Where the pinch really bites
Because mortgage interest relief is given at a flat rate rather than your marginal rate, landlords with large mortgages and higher-rate income can see their effective tax bill rise by more than the headline percentage suggests. If you are heavily geared, it is worth running your own figures properly rather than relying on the headline.
Will rents rise?
The honest answer is that some landlords will try to pass the cost on, and many will find it hard to do. Rents have been climbing as supply falls, as we covered in our look at record rents and the shrinking rental supply. Under the Renters' Rights Act, increases also have to be justified at market level, and tenants can challenge them at tribunal. So the tax rise is more likely to squeeze landlord margins and nudge some owners towards selling than to be passed on in full.
That fits with a pattern we have already seen, where buy-to-let is changing hands rather than disappearing. Some landlords exit, others buy, and the portfolios that remain tend to be better run.
Seven practical steps before April
- Work out your real exposure. Total your rental income, allowable expenses and finance costs for the current tax year, then model what the same figures look like at 2027 rates.
- Check your rent against the market. If your rent is well below comparable homes, a properly evidenced increase may be justified. Follow the correct process and be ready to support it, as set out in our guide to defending a Section 13 rent increase.
- Claim every allowable expense. Repairs, insurance, agent fees, safety certificates and accountancy costs all count. Keep clean records and receipts.
- Get ready for Making Tax Digital. Digital record keeping is now part of landlord life, so read our Making Tax Digital guide for landlords if you have not already sorted your software.
- Review your mortgage. If your fixed rate is ending, a better deal could offset some of the extra tax. Our remortgage guide walks through the process.
- Talk to an accountant about structure. Holding property in a limited company works well for some and badly for others, and moving existing properties can trigger Capital Gains Tax and Stamp Duty. Do not restructure on a hunch.
- Decide whether the numbers still stack up. If a property no longer earns its keep, selling may be the right call. Read our Capital Gains Tax guide for selling a rental property before you decide.
Other Budget measures worth knowing
Landlords were not the only ones affected, and some of the wider changes shape the market you operate in:
- Your First Home: a £4.7bn scheme offering 20% equity loans with a five-year interest-free period. Pre-registration is due to open by the end of December 2026, with first loans from April 2027. Our explainer on the Your First Home scheme has the details. More first-time buyers could mean slightly more competition for entry-level homes.
- Lifetime ISA: the withdrawal charge for buying a first home above the £450,000 cap drops to 20% from 29th October 2026.
- High-value council tax surcharge: homes worth £2 million or more face an annual surcharge from April 2028, charged to owners rather than occupiers.
- Affordable homes: an extra £1.5bn for the Social and Affordable Homes Programme, aimed at around 10,000 homes.
Nothing in the published Budget summaries suggests a change to Capital Gains Tax on residential property, so existing rules still apply for now.
Keeping a sense of proportion
A four point rise is a real cost, but it is not the end of landlording. Landlords who keep homes let, keep tenants happy and keep costs under control still have a viable business. The ones who struggle tend to be those with high borrowing, regular voids or properties that need constant attention. Tax is just one part of that picture, and it is the part you can plan around.
How Moovehub can help
Every pound counts more when tax is rising, so avoiding empty weeks and costly mistakes matters. If you want a great tenant found quickly for a flat fee, our tenant find service can help. If you would rather hand over the day to day running, our fully managed service takes care of it. And if the numbers have convinced you it is time to move on, you can find out how to sell your home with a flat fee and no percentage commission.
This article is general information, not tax or financial advice. Speak to a qualified accountant about your own circumstances.
Sources: Professional Adviser on the rate rise, Propertymark Budget summary.
