Budget 2025: What Landlords Need to Know About Property Income Tax Changes
The Autumn Budget 2025 has delivered a major update for UK landlords. From April 2027, the government will increase property income tax rates across the board: the basic rate rises to 22%, the higher rate to 42%, and the additional rate to 47%. This follows a decade of changes that have already gradually reduced returns for private landlords.
The Forecasted Impact
According to the Office for Budget Responsibility (OBR), this increase is expected to generate an additional £0.5 billion per year on average from 2028–29.
The OBR highlights that these higher property income tax rates are likely to push up rental prices. Landlords facing increased tax liabilities may pass on the additional cost to tenants, particularly in high-demand areas, potentially increasing rental costs across the UK.
According to ONS data, average UK private rents rose by 7.7% in the 12 months to March 2025, reaching about £1,332 per month, with rents in England averaging around £1,386 per month.
The Broader Landlord Landscape
According to RICS, almost half (48%) of landlords own just one property, meaning many are small-scale landlords who may be particularly vulnerable to tax and cost increases.
According to the same RICS research, 42% of landlords cite taxation as the biggest barrier to investment, while 23% have already sold or reduced their portfolios in the past two years. Around a third expect to exit or downsize in the next two years, potentially putting upward pressure on rents if demand remains high.
According to a buy-to-let lending index, despite sector stress, there has been a 17% increase in the number of loans to property investors in 2025, including a 28% uplift for newly purchased rental homes. However, it is worth noting, this data covers both individual landlords and limited company (corporate) buy-to-let purchases, with a substantial portion of the lending attributed to corporate investors, who will not be liable for the upcoming personal property income tax increase.
What This Means for Landlords
Lower net rental yields – Landlords will need to account for higher tax liabilities when calculating projected rental profits.
Portfolio planning is crucial – Those with multiple properties should reassess cash flow and consider structuring strategies to manage tax efficiently.
Potential market impact – Reduced returns may influence the supply of rental homes, which could affect rental rates and tenant demand in high-demand areas.
Strategic Considerations
Landlords should begin reviewing their portfolios in light of these announced changes:
Forecast cash flow: Factor in higher income tax to understand true net profits.
Plan for refinancing or restructuring: Consult with accountants or property advisers to explore options like company structures where appropriate.
Consider long-term property value trends: Reduced returns could influence purchase decisions and rental pricing strategies.
At Property Like A Pro, we guide landlords through these evolving tax rules, helping to assess rental portfolios, calculate projected returns, and identify strategies to maintain profitability in a changing market. We do not provide tax advice ourselves, but our trusted SRL partner can help clients understand the implications of these changes.
Final Thoughts
The Budget 2025 tax changes underline the importance of strategic property planning. Landlords can no longer rely on historical income patterns; careful planning and professional guidance are essential to protect returns and navigate the evolving property landscape.