Budget 2025: Landlord income tax rates to rise
Landlords will pay increased rates of income tax under plans announced by Chancellor Rachel Reeves today.
Rates of income tax from property income will increase by two percentage points from April 2027, a move which the Office for Budget Responsibility (OBR) has recognised will hit landlords in the pocket and force rents up.
The basic, higher and additional rates will increase to 22%, 42% and 47% respectively, a move that could add between £20 and £25 per month to typical rents in England.
It comes on top of changes to Mortgage Interest Relief and Stamp Duty which have already increased landlord costs and hit profits.
The Office for Budget Responsibility (OBR) in a leaked report, released before the budget was announced, said: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns.
“This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run.
“This risks a steady long-term rise in rents if demand outstrips supply.”
Other measures that will affect landlords include an annual High Value Council Tax Surcharge, which will be introduced for properties valued at over £2 million, to be introduced in April 2028.
The surcharge, which will be based on 2026 valuations, will be banded, ranging from a £2,500 surcharge to a £7,500 surcharge for properties over £5 million.
This will be levied on property owners, rather than council taxpayers, further increasing landlord costs.
Responding to today’s budget NRLA chief executive Ben Beadle said: “Despite claims of tackling cost of living pressures, the Government is pursuing a policy that the Office Budget Responsibility (OBR) has made clear will drive up rents.
“Almost one million new homes to rent are needed by 2031. But this Budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”
Member webinar
The NRLA team will be hosting an exclusive member webinar this Friday (28th November), offering you an in-depth analysis of all the key announcements and how they are likely to affect your business and the wider sector.
The hour-long session, starting at 11am, will feature an expert panel including NRLA chief policy officer, Chris Norris, chair of the Chartered Institute of Taxation’s property tax committee, Leigh Sayliss and Founder of Taxd, Arjun Kumar.
Following a discussion on the headline measures announced, their impact and how you can prepare, the team will also cover our key tax calls, and give an update on the Government’s Making Tax Digital plans. There will also be a Q&A session, giving you the opportunity to put your questions to our team of experts by emailing the campaigns and public affairs team at [email protected]
You can register for our Budget webinar here – with registering also allowing you to watch a recording back at a time to suit you, if you can’t make it on the day.
For more on what the budget means for you watch our video with chief policy officer Chris Norris below:
