Changes in tax for landlords?
With a new face in Downing Street with fresh ambitions around defence and social care, and a fiscal tightrope to walk, it’s no surprise that landlords’ eyes are trained keenly on this autumn’s Budget announcements.
Residential property is the largest store of wealth in the UK, making it a perennial target for revenue-raising tactics, and this October’s event could certainly be another one to monitor closely. Here are the key elements property investors should look out for.
1: Higher Capital Gains Tax
There’s recurring speculation around a further increase in Capital Gains Tax (CGT), possibly aligning rates more closely with those of income tax. Several commentators have highlighted this as a potential revenue-raising option for the government, though nothing has been clarified or even hinted at so far.
For long-term property owners who intend to keep their assets indefinitely, it’s less of a concern. Yet for those looking to realise investments over a shorter time frame, any CGT increase would mean selling becomes more expensive. The incentive to hold assets longer may increase, and disposal strategies and timing of sales would become more important.
2: How the ‘mansion tax’ will work
In last November’s Budget, Rachel Reeves unveiled a so-called “mansion tax”, formally known as the High Value Council Tax Surcharge, on residential properties worth £2mn or more, due to take effect from April 2028.
This proposed surcharge to council tax is set to apply to fewer than 1% of homes, representing an estimated 165,000 properties across England. However, much remains to be ironed out in terms of how it will work. Many homes worth more than £2mn have not changed hands for several years, making it harder to establish an accurate current value
Clearly, technology will need to do a lot of heavy lifting in the process, but even so there are concerns that there aren’t enough qualified valuers to meet the deadline. The government has said that liability for the tax will fall upon the owner of a property rather than the tenant, although the tenant is often the party that pays council tax, so it’s not yet clear how the system will operate for high-value rental properties.
The autumn Budget may contain more detail on how things will work, or any refinements to the scope and timeline.
3: Broader wealth or property taxes
There has been much discussion around various forms of wealth taxation such as a new annual property tax, potentially replacing stamp duty and council tax.
The Prime Minister has previously backed replacing council tax and stamp duty with a proportional property tax (PPT) levied according to value. It could mean that owners of larger and more valuable homes, including second homes and rental properties, pay more.
While landlords could become liable for any such annual property tax, no specific proposal has been announced. Indeed, last month Mr Burnham had ruled out an overhaul of property taxes in the upcoming Budget. With growing pressure from many Labour MPs and activists, a landmark move on property tax could emerge at some point, but sweeping reforms would inevitably take time to plan and introduce.
4: Higher income tax
For most private landlords, the most important issue is probably not a dramatic new Budget announcement this year, but the already-confirmed increase in rental income tax from April 2027, which directly affects cash flow and property yields.
Income tax on rental profits and savings interest is scheduled to increase from the 2027/28 tax year, with each band increasing by two percentage points to 22%, 42% and 47% for the basic, higher, and additional rates respectively.
Those using a company structure to pay themselves dividends from a property portfolio already face higher tax. A rise in the ordinary and upper rates of dividend tax by two percentage points took effect this tax year from 6 April 2026.
The current dividend tax rates are:
- 10.75% for basic rate taxpayers
- 35.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers (unchanged from 2025/26)
Could the new Chancellor go further still in the autumn Budget 2026, increasing taxes on unearned income even more?
We will have to wait and see. In any case, in light of the recent changes, and those that may be in the pipeline, it’s worth landlords stress-testing their portfolios to calculate whether net yield is sufficient in the new era of larger tax bills, higher finance costs, and legislative uncertainty.
