Budget 2025: Landlord Impact in a Nutshell
Published on November 29, 2025 by Sarah Mac
The Autumn Budget 2025 delivered a series of tax changes aimed at landlords and property owners, with the government citing a need for “fairer” treatment across different income types.
The headline measure was a new tax band structure for property income, meaning individual landlords will face a 2% rise in income tax on rental profits from April 2027. This change is expected to raise £500 million per year and will most affect private landlords who hold properties in their own name, rather than through a limited company.
Alongside this, a new Council Tax surcharge for high-value homes and further powers for local authorities to tax short-term lets were introduced. While these measures do not come in immediately, they signal a continued shift in how property wealth and income are taxed.
Here is a summary of what was announced — and what it means for private landlords.
Income tax rise on property income
From April 2027, income tax on rental profits will rise by two percentage points. But rather than adjusting the general income tax system, the government has introduced separate tax bands for property income only.
The new property income tax rates will be:
- 22% for basic rate taxpayers (up from 20%)
- 42% for higher rate taxpayers (up from 40%)
- 47% for additional rate taxpayers (up from 45%)
This means that every pound of rental profit earned after allowable costs will be taxed more heavily — but only for those who own property in their personal name. Company landlords are not affected by these personal tax rates, though they still pay corporation tax, which remains at up to 25%.
The changes come on top of existing pressure from Section 24, which restricts the amount of mortgage interest landlords can offset against rental income. For many landlords, this has already reduced profitability — and the new tax bands will add further strain.
There is also a technical change around how tax-free allowances are applied. Personal Allowance and other reliefs will now be applied to employment income first, meaning less opportunity to offset rental profits. While this sounds minor, it may increase the effective tax burden for some.
Overall, these changes make it more expensive to let out property as an individual, and may lead more landlords to consider incorporating or restructuring how they hold their portfolios.
Council tax surcharge for high-value homes
From April 2028, a new High Value Council Tax Surcharge – widely dubbed a mansion tax – will apply to homes in England valued at £2 million or more. This levy will be paid by the homeowner, not the occupier, and will be charged on top of existing council tax bills.
The new rates are as follows:
| Property Value | Annual Surcharge |
|---|---|
| £2.0m – £2.5m | £2,500 |
| £2.5m – £3.5m | £3,500 |
| £3.5m – £5.0m | £5,000 |
| £5.0m+ | £7,500 |
To determine which properties are affected, the Valuation Office Agency will begin a targeted valuation exercise in 2026. Homes that are valued at or above the threshold at that point will be subject to the surcharge from April 2028, with revaluations scheduled every five years.
Importantly, although local councils will collect the surcharge, the funds will go to central government, not to local authorities.
The Treasury estimates that fewer than 1% of homes in England fall within the scope of the new charge. However, the impact will be felt most in London and the South East, where property values are significantly higher than the national average.
Looking ahead, more homeowners may find themselves caught by the surcharge if property prices continue to rise. According to Rightmove, the number of homes for sale priced at £1 million or more has more than doubled over the past six years — suggesting that £2 million may not be the outlier it once was.
Full details of the new charge can be found here:
Gov.uk – High Value Council Tax Surcharge
Tourist tax powers for holiday lets
In another significant move, local authorities and mayors will now have the power to introduce an overnight visitor levy on short-term and holiday lets, including Airbnb-style accommodation.
This “tourist tax” builds on earlier changes, such as the decision to abolish the Furnished Holiday Lettings tax regime from April 2025. For landlords who have shifted to short-term lets to increase yields, this is yet another factor to weigh up when assessing the long-term viability of the model.
If implemented locally, the levy could increase operating costs and reduce margins — particularly in tourist hotspots.
What didn’t change
A few widely expected or hoped-for measures were not included in the Budget:
- No Stamp Duty Land Tax (SDLT) reform in England
- No new National Insurance charge on rental income
- No change to Local Housing Allowance (LHA) rates, which remain frozen
- The phased rollout of Making Tax Digital for Income Tax (MTD ITSA) remains on schedule from April 2026
While the absence of new SDLT or LHA measures will come as a relief to some, the overall tone of the Budget was clearly aimed at increasing tax take from property income and wealth.
Final thoughts
The Budget 2025 will hit individual landlords hardest, especially those already managing reduced profits due to mortgage interest relief changes, compliance costs, and rising maintenance expenses.
Although the changes are phased in from 2027 and 2028, landlords are being advised to review their ownership structures, reassess cashflow, and seek professional tax advice sooner rather than later.
The direction of travel seems clear: property income is being carved out for separate treatment, and the tax burden on landlords is increasing steadily. With more pressure likely in future Budgets, planning ahead is more important than ever.