The Chancellor’s Autumn Budget delivered a clear message: income from property and other assets will be taxed more heavily over the coming years, while local authorities and combined regions will gain new powers that could reshape parts of the rental and short-let market. For landlords, the package marks a significant shift in how the Government intends to treat property income, high-value homes, and the broader housing system.

Higher Taxes on Property Income

One of the central measures is the introduction of separate income tax rates for property. From April 2027, the basic rate on rental profits will rise from 20 per cent to 22 per cent, while higher-rate property income will be taxed at 42 per cent. Additional-rate landlords will see their rate increase from 45 to 47 per cent.

The Treasury frames this as narrowing the gap between taxation on labour and taxation on income from assets. For landlords, the practical effect is straightforward: more tax on rental profits. A basic-rate landlord earning £20,000 in taxable rental profit will pay around £400 more a year once the new rates apply. A higher-rate landlord on £40,000 profit will see their tax bill rise by roughly £800.

Threshold freezes compound this. The personal allowance and higher-rate threshold are now held until 2031. As wages and rents gradually rise, more landlord income will be pushed into the higher property tax brackets, independent of any change in profit levels. HM Treasury and the OBR expect these combined measures on property, dividends, and savings to raise around £2.1–£2.2 billion a year by the end of the forecast period.

A New Surcharge on High-Value Homes

A separate measure will introduce a new annual council tax surcharge for properties valued at more than £2 million. This takes effect from April 2028, following updated valuations in 2026, and will apply to owners rather than occupiers. The structure includes four bands, starting at £2,500 a year for homes worth between £2 million and £2.5 million, rising to £7,500 for homes valued above £5 million. These amounts will be uprated in line with CPI.

Although the Government estimates that fewer than one per cent of properties in England fall into scope, the impact is highly concentrated. A large share of affected homes sit in London and the South East, including many owned as rental properties or second homes. Treasury figures suggest the surcharge will raise around £400 million a year by 2029–30.

New Powers Over Visitor Levies and Short-Let Markets

Alongside the tax measures, the Budget gives Mayoral Combined Authorities the power to introduce a visitor levy on overnight stays. The details will follow in consultation, but the framework opens the door to local charges applied to hotels, serviced apartments, holiday lets, and short-let accommodation.

Cities such as Liverpool already operate similar schemes. With the Budget formalising these powers, other regions may adopt them over the next several years. For professional operators and landlords with substantial short-let portfolios, this could introduce a new cost layer depending on how each region implements the charge.

Energy Bills and Housing Supply

The Budget also includes measures that indirectly affect the property sector. The Government will remove some policy costs from domestic energy bills from April 2026, cutting average household bills by around £150. This reduction will help tenants and reduce operating pressure on landlords who include utilities within the rent, such as HMO operators or those running all-inclusive models.

The Chancellor also reaffirmed commitments to increase housing supply. Updated planning rules, “grey belt” reforms, and new development zones — combined with devolved housing funding and the establishment of the National Housing Bank in Leeds — are expected to raise housebuilding over the second half of the decade. The OBR forecasts an additional 170,000 homes by 2029–30, although the effects will unfold gradually.

The Economic Backdrop: Inflation and Rates

The OBR expects inflation to fall steadily next year, aided in part by today’s energy bill measures. The policy package reduces CPI by an estimated 0.4 percentage points in 2026, with inflation expected to settle near the Bank of England’s target in the following years.

Lower inflation helps ease borrowing costs, and the Budget documents note that the fall in inflation has already fed through to lower projected debt-servicing costs for the Government. For landlords refinancing over the next one to two years, this offers some potential relief compared with conditions at the peak of rate rises. However, mortgage rates are still far higher than those seen during the 2010s, and the new property income tax rates will apply irrespective of where interest rates settle.

A Reset in the Tax Treatment of Property

Taken together, the package marks a deliberate shift towards higher taxation of property income and high-value ownership, with modest offsetting gains through lower energy costs. The new visitor levy powers add a further dimension for short-let operators, while supply-side measures sit firmly in the medium-term column.

The practical effects will vary across the sector. Larger, low-geared landlords may absorb the changes more easily. Smaller landlords — particularly those with thin yields or mortgages rolling in the next two years — will feel the strain more quickly. The immediate message, however, is unambiguous: property income is now positioned as a higher-taxed category, and that will define the fiscal landscape for landlords over the remainder of the decade.