Budget 2025: What Actually Changed for Landlords – and What Didn’t

Summary: The 2025 Budget introduced a 2% rise in income tax rates on rental profits from April 2027 and a new High Value Council Tax Surcharge on properties over £2 million from 2028. However, there were no changes to National Insurance on rental income, Stamp Duty Land Tax, or Local Housing Allowance rates, leaving some key landlord concerns unaddressed.

Introduction: Budget 2025 and the Private Rented Sector

Chancellor Rachel Reeves’ Autumn Budget on 26 November 2025 brought a mixed bag of announcements for landlords and the private rented sector (PRS). While fears of National Insurance (NI) contributions on rental income were allayed, landlords face higher income tax rates on property income and a new council tax surcharge targeting high-value homes. Meanwhile, other pressing issues such as Stamp Duty Land Tax (SDLT) and Local Housing Allowance (LHA) remain unchanged, despite strong lobbying from landlord organisations.

Key Tax Changes Affecting Landlords

The most significant change for landlords is a 2% increase in income tax rates on rental profits, effective from April 2027. This means that rental income will be taxed separately from other income, with new ‘property’ tax bands as follows:

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

In practice, landlords holding properties in their own name will pay 2 percentage points more tax on every pound of taxable rental profit earned after April 2027, assuming income remains within the same tax band. This increase compounds the impact of previous restrictions, such as Section 24 mortgage interest relief limitations, further squeezing landlords’ effective tax rates.

Additionally, HM Revenue & Customs (HMRC) has clarified that certain reliefs and allowances will be applied against other income first, with property, savings, and dividend income considered last. This reduces landlords’ opportunities to shelter rental profits within personal allowances or other reliefs, potentially increasing their overall tax liability.

For landlords operating through companies, the new personal tax rates do not apply; instead, they continue to pay corporation tax. However, this distinction adds complexity to the ongoing “incorporate or not?” debate among landlords and their advisers.

High Value Council Tax Surcharge: The ‘Mansion Tax’

From April 2028, a new High Value Council Tax Surcharge will apply to homes valued at over £2 million in England. Often referred to as a ‘mansion tax’, this measure will affect a relatively small number of landlords, primarily those with high-value single properties or small portfolios in London and the South East.

Politically, this surcharge signals a broader shift towards taxing wealth held in property, rather than increasing headline rates of Income Tax, NI, or VAT. Landlords with properties in this bracket should prepare for the additional financial burden this will impose.

Visitor Levies for Short-Term and Holiday Lets

The Budget also grants new powers to regional mayors and local authorities to introduce overnight visitor levies on short-term accommodation, including holiday lets and serviced apartments. This effectively acts as a tourist tax, potentially increasing costs for landlords operating in this sector.

Landlords who have diversified into short-term lets to improve rental yields should reassess their business models in light of these new powers, as additional levies could impact profitability.

What Didn’t Change: NI, SDLT, and LHA

Contrary to earlier speculation, the Chancellor did not introduce National Insurance contributions on rental income. This decision will be welcomed by many landlords who feared further tax burdens.

Similarly, there were no changes to Stamp Duty Land Tax in England. The rates and thresholds remain as before, offering some stability for landlords considering property acquisitions.

Local Housing Allowance rates also remain frozen, despite calls from landlord bodies to increase them to reflect rising rental costs. This ongoing freeze continues to place pressure on tenants reliant on housing benefits and indirectly affects landlords’ ability to secure tenants who can afford market rents.

Making Tax Digital for Income Tax (MTD ITSA) Timetable Remains

The existing timetable for Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) remains unchanged, with phased implementation starting in April 2026. Landlords will need to ensure their accounting and reporting systems comply with these digital requirements to avoid penalties and streamline tax submissions.

Implications and Next Steps for Landlords

Budget 2025 introduces notable tax increases for landlords, particularly through higher income tax rates on rental profits and the new council tax surcharge on high-value properties. While some feared NI contributions on rental income, these were not introduced, providing some relief.

Landlords should review their portfolios and tax strategies in consultation with professional advisers to understand the impact of these changes, especially regarding incorporation decisions and long-term planning.

Those involved in short-term and holiday lets must consider the potential introduction of visitor levies in their regions and factor these into their financial models.

Finally, landlords should continue to monitor developments around Making Tax Digital and ensure compliance with upcoming digital reporting requirements.

For ongoing updates and detailed analysis of Budget 2025 and its impact on landlords, visit Landlord Association.

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Discover the key changes for landlords in Budget 2025, including a 2% rise in rental income tax from 2027, a new mansion tax from 2028, visitor levies on short-term lets, and what remains unchanged.

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Budget 2025: Key Tax Changes for UK Landlords and What Stayed the Same