Hi everyone,

I’m writing this on Saturday morning, looking back at what’s been quite a busy week! As well as the budget on Wednesday, I spent the same day at the National Landlord Investment Show at Old Billingsgate then headed over to the Central London Property Network at the London Bridge Hotel in the evening.

With the Chancellor delivering his first Budget on the same day, you can guess what everyone was talking about and, again, changes are afoot for landlords. Here is my round-up of the changes that matter most for property investors, plus a few wider points that could have a knock-on effect. I hope you find it helpful!

The headline: landlords pay more income tax on rent

• Property income tax rises again from 6 April 2027. Last year’s Budget had already set the rates on rental profit at 22%, 42% and 47%. This Budget adds a further two points, taking them to 24%, 44% and 49%. That is four points more than landlords pay today.
• Mortgage interest relief (Section 24) will be given at 24% increasing from 20%, in line with the new basic rate. Higher rate landlords with mortgages are hit hardest, as they pay 44% on profit but only get 24% back on their interest.
• Limited company landlords are not affected. The rise only applies to income tax, and corporation tax and dividend tax were left alone. The gap between owning personally and owning through a company is now wider and I was reading just today in the financial times how the extinction of the casual landlord is almost complete (no surprises there) – the market is simply needing to professionalise.
• The £1,000 property allowance and Rent a Room relief stay, which is good news if you take in a lodger.

What did not change

• Capital Gains Tax stays at 18% and 24% on residential property, despite all the rumours.
• Stamp Duty is unchanged, including the 5% surcharge on additional homes – this is a relief given earlier rumours of a shake up to stamp duty and council tax
• The “mansion tax” (High Value Council Tax Surcharge) goes ahead from April 2028 for homes in England worth £2 million or more. The threshold stays at £2 million, so very few Medway properties will be caught.

The wider economy

• Interest rates: the Office for Budget Responsibility expects rates to rise from 3.75% today to around 4.25% by mid-2027 and 4.5% by 2031. If you are refinancing in the next year or two, it is worth stress testing your numbers now as this is very likely to put more pressure on mortgage rates.
• Inflation is running at 3.5%, with the OBR expecting it to fall back to 2% from 2028.
• Growth has been upgraded to 1.2% this year.
• Income tax thresholds stay frozen until 2031, so as rents rise, more landlords will drift into higher bands.
• The National Living Wage rises 3.9% to £13.21. That helps tenant affordability, particularly in the room let market.
• The gas standing charge will be scrapped and folded into unit prices from 2027, worth keeping an eye on if you include bills in your rents.
• Mayors will get powers to charge an overnight visitor levy, which serviced accommodation and holiday let owners should watch.
• Properties in bands A – D will see a £100 credit through their council tax bill, yet landlords and second homes are excluded because the council tax bill is not in the tenants’ names

An early election?

There have been a lot of headlines about the possibility of an early election and whilst the prime minister has explicitly said there will not be, I think this is one to watch (for example, we saw this with Starmer saying he isn’t leaving not long before he did).

My concern here is that this budget was designed as a softer one to get the public’s support and increase party popularity before a potential election and second, harder budget, should Labour win. You will see from the graph below how the budget was seen as incredibly fair by the general public.

With this in mind, the Burnham bounce is still strong and whilst data is not available for post budget polling yet, you will see from the graph below with data up to 25th October how Labour (and Conservative) have seen gains, with Labour still taking a clear lead.

What this means for investors

I have been reading about how the OBR says this will materially reduce landlords’ returns and expects it to push rents up over time as supply falls this is not good news for tenants – ironically, the ones the government says they are helping. We are already seeing landlords sell, and that means less choice for tenants and stronger demand for good, well managed rooms. I will continue watching closely and updating you as things change!

In terms of stability moving forward for anyone holding property in their own name, now is the time to review your structure with an accountant. What will be key is checking how much of the rise your mortgage relief offsets, and make sure your rents are where they should be.

With their higher yields, well run HMOs are still one of the better ways to absorb these costs and if you would like a chat about your portfolio, your rents or whether an HMO could work for you, just drop me an email to hasan@home-share.co.uk and I will be happy to help where I can.

Hasan

This update is general information, not tax or financial advice. Please speak to your accountant or adviser about your own circumstances.