Budget 2025: Key Tax Changes Affecting Landlords

Budget 2025: Key Tax Changes Affecting Landlords

The Autumn Budget 2025 brought in several important updates that affect rental property owners across England Wales and Northern Ireland. These changes include new property income tax rates, new ordering rules for how income is taxed and a continued freeze on income tax bands until 2031. The Budget also confirmed plans for a high value council tax surcharge on homes worth more than two million.

This guide explains the key changes and what they mean for landlords.

1. Income Tax and Rental Profits

The Government confirmed that income tax thresholds will stay frozen until 2031. The personal allowance and higher rate threshold will not rise with inflation. As rental profits and earnings increase more income can move into a higher tax band. This effect is known as fiscal drag and can mean landlords pay more tax even when rental profits have only increased slightly.

Rates of income tax on non property income are unchanged. National insurance is still not charged on rental income and this remains the position after the Autumn Budget 2025.

The Office for Budget Responsibility will continue to monitor the long term impact of the threshold freeze and how it affects both households and the rental market.

Key points:

• Income tax thresholds remain unchanged until 2031
• Frozen tax bands may increase the tax due on rental profits
• Higher tax rates can apply sooner as income rises within fixed thresholds
• National insurance on rental income is not being introduced

2. New Property Income Tax Rates From April 2027

From 6 April 2027 rental property income will be taxed using separate property income tax rates. These rates increase the tax on rental profits by several percentage points from April 2027 when compared with the current standard rates of income tax.

The new property income tax rates will be:

• Property basic rate: 22 percent
• Property higher rate: 42 percent
• Property additional rate: 47 percent

These new rates apply only to rental property income. Other income continues to follow the standard rates already outlined above.

3. Changes to How Income is Taxed

The Budget introduced a new order for calculating tax across different types of income. This affects how allowances and reliefs are applied.

The new order of taxation will be:

1. Income that is not property, savings or dividends
2. Property income
3. Savings income
4. Dividend income

This means the personal allowance must now be used against non property income first. Any remaining allowance can then be applied to property income, savings income or dividend income in the way that reduces the overall liability.

The property allowance and the Rent a Room Scheme remain unchanged. Carried forward property losses must still be set against property income.

Relief for residential finance costs:

Relief for residential finance costs will continue to be given as a tax reduction. From April 2027 this relief will be calculated at the new 22 percent property basic rate.

4. Proposed Surcharge on High Value Homes

The Chancellor Rachel Reeves also outlined plans for a high value council tax surcharge. This would apply to homes worth more than two million and would be paid by homeowners in addition to their existing council tax. It is not a new council tax band and it is not a mansion tax although it is often discussed alongside that idea in public commentary.

Social housing will not be included in the scope. A public consultation on the detailed design of the surcharge will take place in early 2026.

This proposal may affect landlords who hold premium rental property.

5. Stamp Duty

Stamp duty was unchanged in the Autumn Budget 2025. Current rates remain the same for both residential and commercial transactions. The Government confirmed that stamp duty will form part of a wider long term review of property taxation.

6. What this Means for Landlords

The Autumn Budget 2025 introduces one of the most significant shifts in rental property taxation in recent years. The combination of frozen tax bands, new property income tax rates and revised ordering rules may change how much tax many landlords pay over the next few years.

Landlords may want to:

• Review projected rental profits between now and 2027
• Check how the new property income tax rates may affect long term returns
• Consider how the threshold freeze could change their overall tax position
• Follow the consultation on the high value council tax surcharge
• Seek guidance when planning portfolio changes or the timing of a sale

If you want support reviewing your property plans or need help understanding how these changes may affect you the GPS Commercial team can guide you through your options.

In Summary

• Income tax thresholds remain frozen until 2031
• Property income tax rates of 22 percent, 42 percent and 47 percent begin in April 2027
• Allowances must be used against non property income first
• Relief for residential finance costs will be given at the 22 percent property basic rate from April 2027
• A high value council tax surcharge for homes worth more than two million is planned with consultation in early 2026
• Stamp duty remains unchanged