Hello readers,

You will undoubtedly be very aware about the details from the budget on 26^th November, with the Government being taken to task on several things including what the new about the apparent surplus before increasing taxes by £26bn.

In comparison to previous budgetary measures landlords got off fairly lightly, however there are still several changes you need to know about, so I thought I’d give you the headlines.

No National Insurance on rental income

There was a lot of speculation about this before the budget, but thankfully it did not feature.

A 2% rise on income tax for income from property from April 2027

From a government that simply hates ambition, this was a sting in the tail for landlords. The change here is how, for property held personally, rental income will be taxed using separate bands with every £1 of taxable rental profits attracting 2% more tax.

This will be implemented with a special band for landlords, at a 22% basic rate, 42% higher rate and 47% additional rate. I’m actually surprised that the Government chose this step because with the Section 24 changes, unincorporated landlords are already heavily taxed.

Those who hold property in a limited company will avoid these additional rates but will need to pay corporation tax.

A 2% rise to dividend and savings taxes from April 2027

This one will hit incorporated landlords and company directors – another tax on ambition and risk taking if you ask me!

• Tax on dividend income will increase by 2 percentage points
  
  
  • The ordinary rate will rise from 8.75% to 10.75%
  • The upper rate from 33.75% to 35.75% from April 2026
  • The additional rate will remain unchanged at 39.35%

• Tax on savings income will increase by 2 percentage points across all bands
  • The basic rate will rise from 20% to 22%
  • The higher rate from 40% to 42%
  • The additional rate from 45% to 47% from April 2027

What I feel is happening here is that, particularly on dividends, the government is slowly trying to force directors to take a PAYE salary. You will see from the graph below how these changes will impact different forms of income:

Unfortunately, these changes in my view will detract from the attractiveness of savings, make it less attractive to run a business (aka, you may as well get a job given the difference in taxation) and overall contribute to ongoing sluggish growth.

A ‘mansion tax’ on properties worth over £2m

Whilst this may only affect a small number of landlords, it’s yet another unwelcome cost.

My concern here is about how it will naturally be weighted to affecting London properties and there will be some who are not wealthy but will have inherited and now need to sell because that will not be able to afford the cost.

There are four bands to match council tax bands F, G and H, with money going directly to the treasury rather than the local authority – it’s also worth bearing in mind that these values are based on data from 1991:

1. Properties valued from £2m to £2.5m will pay £2,500
2. Properties valued from £2.5m to £3.5m will pay £3,500
3. Properties valued from £3.5m to £5m will pay £5,000
4. Properties valued at more than £5m will pay £7,500

Will we see other property taxes for lower value properties over the remainder of the term? A worrying thought that’s for sure!

Overnight levy for short-term and holiday lets

This is one to keep a close eye on as councils and mayors can now introduce a “tourist tax” on short-term lets such as serviced accommodation and Airbnb properties.

Those who operate a serviced accommodation model will want to keep their eye on this.

Overall, from a general perspective it’s hard to see who the winners here are apart from those claiming child benefit or with very low wages. It’s a real shame that Labour have failed to recognise how making business as attractive as possible should be a positive thing for the economy!

From the property side, there’s a lot of changes at the moment and with the Renters’ Rights Act coming into force you could be forgiven for thinking that property is just not worth it now.

Certainly, for the unincorporated landlord I do think there is a case to think along this path. However, with all these changes the sector just needs to get more professional and I always say how the good landlords that look after their portfolio have nothing to worry about.

The increase in ex-rental properties hitting the market are an opportunity for the savvy investor and the constraint in supply will simply lead to increased rents as demand will remain.

Us property investors are a hardy bunch, used to overcoming challenges and adapting and the next 12 months will be packed with opportunity!

I’d be interested to hear your thoughts – the best way to get in touch is by emailing me on hasan@home-share.co.uk.

Hasan