Now that the dust has settled on Rachel Reeves’ announcement, the full impact of what the November 2025 Budget means for landlords can be viewed with a clear head.
Announcements in Parliament are often only part of the story, and to understand the full impact, a detailed analysis of the full Budget Report is an absolute must.
Below I’ve shared my views on the full November budget report as well as my opinion on the impact of changes from a tax perspective on landlords.
Changes to tax that could affect landlords
Two taxes saw changes, these were the income tax on rental income and the tax on dividends. A completely new tax known as the High Value Council Tax Surcharge, on properties worth £2 million or more from April 2028, 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.
It goes on to say that:-
- 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 £2.2 billion 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 2 percentage points from April 2026. There is no change to the dividend additional rate.
- Increasing the tax rate on savings income by 2 percentage points across all bands from April 2027
Tax impact on personal ownership vs limited company
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 can only lead to further pressure on both existing and, potentially, new landlords.
Budget impact on landlords operating in personal ownership
My view is that 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, the upside is that with fewer landlords in or potentially entering the market - demand which is already high will only get higher.
Budget impact on landlords operating in a limited company
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.
For limited company landlords the good news is that 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.
Looking ahead, landlords can hopefully expect a further drop in interest rates. This will compensate for the tax increases, and if the housing market subsequently starts to pick up momentum, the outlook will be much more robust for those landlords that have stayed the course.
Read more about landlord tax in the education section of the Landlord Leaders Community website, in partnership with UK Landlord Tax.
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