Budget 2026: FAQs from our webinar

In last week’s Budget the Chancellor announced increases on new taxes for landlords, alongside other measures relating to taxation, mortgage costs and energy bills. Hundreds of you joined our webinar on the issue, held the following day and here we answer some of the most frequently asked questions.

What was announced

As you will be aware, from April next year, landlords will face a 4% surcharge on income tax on rental income, following the announcement of a new two-percentage-point increase. 

Basic rate taxpayers will pay 24% tax, and higher- and top-rate taxpayers will see their property tax rates increase to 44% and 49%, respectively.  Here's what you were asking about.

How will personal allowances be applied to rental income?

From April 2027, the rules for calculating income tax will change.  Under the new approach, personal allowances and other reliefs will first be applied to other sources of income before being applied to property, savings and dividend income. 

This means that landlords with multiple sources of income may see a change in how their taxable rental income is calculated.

Will the changes to property income tax rates also affect landlords who own properties through limited companies?

No. The announced increase in the tax rate on property income applies to individuals who own properties and receive rental income directly. 

There are no corresponding changes to the tax treatment of property income received through a limited company under this measure.

How might the changes affect mortgage refinancing and rental stress testing?

Mortgage affordability and rental stress tests vary by lender and application type. Landlords borrowing through a limited company may face different rental coverage requirements to those buying or refinancing personally. For example, one lender may require 125% coverage for basic-rate taxpayers and company applicants, versus 145% for higher-rate taxpayers borrowing personally. 

Stress-test rates also vary based on whether the application is a remortgage, capital raise or purchase, and the fixed-rate term. Some applications may be assessed at 4.5% or the pay rate plus 0.5%, whichever is higher; shorter fixed-rate products may use 5.5% or the pay rate plus 2%, whichever is higher. 

These are lender-specific examples, not universal requirements. Landlords considering refinancing should consult a mortgage broker about available options and potential effects on borrowing capacity.

Will the First Homes scheme have an impact on house prices?

The scheme is a positive step towards supporting access to homeownership, particularly given its generous income caps. It should also help stimulate new build starts, which are flat.  

However, it is too early to determine whether it will have a wider impact on house prices. While the measures may provide additional support for prospective buyers, their overall effect on the housing market remains to be seen.

What is the NRLA doing to challenge the Government's approach to landlords? Can the Budget measures be challenged or reversed?

The NRLA meets regularly with politicians and policymakers to ensure landlords’ contribution to housing is recognised.  We challenge negative perceptions of the sector by presenting strong evidence and real-life examples of how responsible landlords provide homes and support to tenants. We set out in detail the economic contribution landlords make and the fact that increasing costs on landlords risks pushing up rents.  

Reversing Budget measures is difficult and, once announced, decisions are rarely overturned. However, we can still challenge their implementation and try to mitigate their impact.  

The NRLA works with supportive MPs to scrutinise these measures through parliamentary questions, landlords’ experiences and clear explanations of their impact on the private rented sector.

More information

You can read a deep dive into the contents of last week's budget here.

You can read about our response here.

We also recorded our podcast, Listen Up Landlords the day after the budget was released. You can listen by clicking the link below: