From introducing a “mansion tax” to creating a separate tax for property income, the November 2025 Budget included several announcements that could affect landlords. Here’s what you need to know about four key changes.
1. Property income will be taxed at a higher rate from April 2026
The major change announced in the Budget that will affect landlords is that, from April 2026, property income will be taxed separately from other sources.
Income derived from property will be taxed at a rate 2% higher than the standard rate of income tax. For 2026/27, the tax rates will be:
- Property basic-rate: 22%
- Property higher-rate: 42%
- Property additional-rate: 47%
As a result, many landlords are likely to see their tax bills rise in the next tax year. Depending on your circumstances, there may be ways to restructure your portfolio to reduce the impact the tax hike will have. For example, you may opt to incorporate properties into a limited company structure.
Speaking to a tax specialist could help you understand your position and the steps you might take to reduce your tax liability.
2. Income Tax thresholds are frozen until 2031
The government has extended the freeze on Income Tax thresholds until 2031.
While Income Tax rates aren’t rising, it means more people could be pulled into a higher tax bracket.
If your income increases in line with inflation, but the tax thresholds remain the same, you could pay a higher rate of Income Tax, even though your income hasn’t increased in real terms.
Coupled with the new higher rate of tax for property income, you could find your tax bill rises more than you expect.
Monitoring your total income could highlight ways to limit the effects of fiscal drag. You may find that increasing pension contributions so your income remains below the next tax threshold could make financial sense, especially when you take a long-term view.
A financial planner could help you understand your options and work with you to create a financial strategy that considers your tax liability.
3. Dividend Tax rates will increase in April 2027
Landlords who manage their properties through company structures could be affected by changes to the Dividend Tax rates.
From April 2027, the ordinary and upper rates of Dividend Tax will increase by 2% – the additional rate of Dividend Tax will remain the same.
The increase might prompt you to review how and when you extract profits from the company to minimise your tax bill.
4. You may be liable for the “mansion tax” from April 2028
Finally, a “mansion tax”, officially called the High Value Council Tax Surcharge, was introduced and will come into force in April 2028.
If you own property that is valued at more than £2 million, you’ll pay an additional tax alongside Council Tax. The mansion tax is paid by the owner of the property, not the occupier.
Due to high property prices, the tax is likely to affect landlords operating in London and the south-east more than other locations.
We could help you secure a buy-to-let mortgage
With tax hikes likely to affect your property profits, securing a competitive mortgage deal could be more important than ever.
If you’re searching for a new mortgage deal on a buy-to-let property, please get in touch. As mortgage brokers, we could navigate the different deals to find one that suits your needs, and be on hand to answer any questions you might have during the process.
Please contact us to talk about your buy-to-let mortgage.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.
The Financial Conduct Authority does not regulate tax planning.
