What does the Budget mean for property income?

The Budget confirms that property Income Tax rates will rise by 2 percentage points from April 2027. This takes the basic, higher and additional rates to 22%, 42% and 47% respectively. For landlords, this means higher tax bills on rental profits at a time when mortgage rates and operating costs are already squeezing margins.

The Treasury expects the measure to raise around £0.5 billion a year from 2028-29, even after factoring in behavioural changes. Officials anticipate a modest “pass-through” effect, where part of the increased tax burden flows into higher rents. However, this is expected to be outweighed by downward pressure on house prices, which reduces other tax receipts. The longer-term implications of higher property taxation are still under review, but landlords should begin modelling the impact now, particularly those operating in highly leveraged portfolios.

The 2025 Budget introduces notable changes for landlords. While the potential National Insurance charge on rental income did not materialise, a 2% increase in property income tax will raise overall personal tax liabilities. In addition, the 2% rise in dividend tax from April 2026 will affect those operating through limited companies. These measures may prompt some landlords to reassess their strategies, and could influence market dynamics, including rental supply and pricing, over time.

Lewis Ratcliffe, Business Partner, Price Bailey