Recently, fellow Landlord Leaders Community member and Tax Expert, Simon Thandi from UK Landlord Tax shared his thoughts on the likelihood of changes as a result of the Budget, and particularly those that centre around property investment.
Now that the dust has settled on Rachel Reeves’ November announcement, I asked Simon to uncover the full impact from a landlord perspective that could benefit the conversations that brokers hold with their clients.
Below, Simon shares his analysis of the full Budget report including his view on the impact of changes from a tax perspective. In the pre-budget article, we looked at the four areas that could affect a landlord from a tax perspective:
· Tax considerations for when you buy: Stamp Duty Land Tax (SDLT)
· Tax considerations for when you receive rental income: Income Tax, Corporation Tax, Tax on Dividends, Annual Tax on Enveloped Dwellings (ATED) and VAT
· Tax considerations for when you sell property: Capital Gains Tax (CGT) and Corporation Tax
· Tax considerations for when you pass away: Inheritance Tax (IHT)
So, let’s start with what hasn’t changed: Stamp Duty, Corporation Tax, Annual Tax on Enveloped Dwellings, VAT, Capital Gains Tax, and Inheritance Tax. Therefore, landlords will be impacted when they receive rental income, so let’s dive into the detail.
What has changed?
The two taxes that did see changes were income tax on rental income and the tax on dividends. Then, a completely new tax known as the High Value Council Tax Surcharge, on properties worth £2m or more, will take effect from April 2028.
In a prelude to the announcements, the Budget Report stated the following:
2.13. Whilst private rental price inflation has fallen to 5.0% in October 2025 from a peak of 9.1% in March 2024, the government is committed to making renting easier and more affordable for 11 million private renters in England.
Further reference is then made as follows:
2.35. The Government is taking action to ensure income from assets is taxed more fairly. Those with property, dividend or savings income pay less tax than those whose income comes from employment or self-employment as they do not pay National Insurance Contributions. The Government is increasing taxes on property, dividend and savings income to narrow the gap between tax paid on work and tax paid on income from assets, raising revenue in a way that limits impacts on growth.
2.36. Increases to the tax paid on income from assets will raise £2.2bn in 2029-30, in a fair and progressive way. The Government is:
• Creating separate tax rates for property income. From April 2027, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%.
• Increasing the ordinary and upper rates of tax on dividend income by two percentage points from April 2026. There is no change to the dividend additional rate.
• Increasing the tax rate on savings income by two percentage points across all bands from April 2027.
What does that mean in practice?
The impact of these increases, together with the changes enacted through the Renters’ Rights Act 2025, are on the back of previous increases in Stamp Duty and restriction of mortgage interest relief.
This could lead to further pressure on both existing and, potentially, new landlords so it’s important for brokers to stay informed. Further details can also be found on the Landlord Leaders website.
Landlords operating in their personal name
Simon’s view: Existing landlords who own property in their personal names will succumb to the additional 2% increase in income tax. An increase in costs inevitably ends up in higher rents, sooner or later.
Whilst the Government might think income from property is unearned, it is not the same as unearned income from dividends on share holdings in stock market listed companies, or interest received from savings in a bank account. Many landlords actively manage their properties in much the same way as small business owners manage their businesses.
Nonetheless, it seems likely that the exodus of the “accidental” landlord that boosted numbers back in the days of 0.1 % interest rates is set to continue.
For committed landlords who see property as part of their long-term wealth plan, painful though this measure will be, the upside is that with fewer landlords in, or potentially entering, the market, demand which is already high, will only get higher. So as a professional tax adviser, I am somewhat perplexed as to how this tax increase ties in with the statement “the government is committed to making renting easier and more affordable for 11 million private renters in England”.
Landlords operating as a limited company
Simon’s view: For landlords who own property through a limited company, or who are looking to add to their portfolio or enter the market as new landlords, the position is more nuanced and potentially more beneficial.
Corporation tax at 19% has remained unchanged on profits up to £50,000. The hike in taxation of dividends by 2% is, in my view, a slight of hand which has gone completely unnoticed by the mainstream press and commentators.
The increase in dividend tax is not just applicable to landlords but to anyone running their business through a limited company. So, the measure does not only affect landlords but every small business that operates through a limited company. Can it be said that these small businesses are deriving unearned income by withdrawing dividends from their own companies?
For limited company landlords, the good news is that paying additional dividend tax isn’t always necessary. Many only withdraw the dividends they actually require and leave profits in the company for either paying back funds originally given to the company, paying off debt, or accumulating for withdrawal at a later more favourable time. Perhaps now, in the event of a change in government in three years’ time.
My estimates are that, on any comparison, a higher rate taxpayer will be substantially better off in a limited company by employing the above strategy – in many cases to the tune of several thousands of pounds. However, as always, it’s important to get professional tax advice for your particular set of circumstances.
Moving forward, landlords can hopefully expect a further drop in interest rates. That in itself will compensate for the tax increases, and if the housing market starts to pick up momentum on the back of this, the outlook will be much more robust for those professional landlords that have stayed the course and invested for the long term.
Adrian Moloney is group intermediary director at OSB Group and Simon Thandi is director and founding partner at UK Landlord Tax.
