On Wednesday, November 26, Chancellor of the Exchequer Rachel Reeves delivered her second Autumn budget since Labour took power in July 2024.
This year's statement comes after a troubling period for the Government, as it fends off falling popularity in the polls, attacks from the Conservatives and the rising popularity of Nigel Farage’s Reform Party.
The Budget rollout itself has been marred by leaks and close media scrutiny. In our own recent Budget whispers blog, we concluded that change was coming to the Private Rented Sector, and it was coming quick.
In this blog, we’ll be taking a look at the Budget and laying out what landlords and lettings need to know, including changes to new separate tax rates for rental income and a High Value Council Tax Surcharge for residential properties worth £2 million or more.
In one of the most relevant announcements for landlords, the government has announced that property income will be taxed separately from other income sources. From April 2026, the new, higher rates will be:
Video taken from Parliamentlive.tv.
The above wasn’t the only change to property-related taxes announced by Reeves. The Government also announced that it will raise the ordinary and upper rates of tax on dividend income by 2%. Savings income will also see a 2% rise from April 2027. The additional dividend rate will remain unchanged.
This is part of a broader government effort to standardise taxation across different types of asset income.
Video taken from Parliamentlive.tv.
As we discussed in our Budget rumours article, the Government was considering several potential changes to council tax. In the Budget itself, Reeves announced that, starting in April 2028, residential properties in England worth over £2 million will pay a “High Value Council Tax Surcharge”.
Here’s what we know so far about HVCTS:
In a statement, the Office for Budget Responsibility (OBR) had this to say:
“The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns. This successive eroding of private landlord returns will likely reduce the supply of rental property over the long run. This risks a steady long-term rise in rents if demand outstrips supply.”
"Previously, earnings from property, pensions, and savings were largely exempt from NI contributions - meaning this was always going to be one of the quirks of taxation policy that the Treasury had their eye on. And it's now confirmed that landlords will see a 2% tax rise on rental income. This will understandably be unpopular with landlords and the macro risk is that it will encourage more to sell up at a time when the market can least afford it. According to our latest market research, a third of all landlords had already sold up or actively tried to sell in the 12 months to October - this could tip the balance even further.
"It also risks leaving renters facing the prospect of rent hikes as the landlords that remain aim to cover their losses. This was already something a large section of landlords were considering in response to the Renters' Rights Act, so this could compound the threat of rental cost rises for tenants.
"As the OBR points out in their analysis, this tax change could exacerbate the supply and demand issues already facing the PRS. I cannot stress enough how vitally we need to build new homes, boost market supply, and do whatever else we can to keep a healthy equilibrium between renters' rights and landlord incentives. However, with this latest policy shift, I fear the scales have become less balanced, rather than more." - William Reeve, CEO, Goodlord
Chancellor Rachel Reeves’ 2025 Autumn Budget makes it clear that the Government is prioritising the taxation of asset income, including rental, dividend, and savings income. For landlords, the combined impact of separate property income tax rates, higher dividend and savings taxes, and the introduction of the High Value Council Tax Surcharge represents a significant rise in ongoing costs and a potential squeeze on profitability.
These changes may encourage some landlords to sell or restructure their portfolios at a time when the Private Rented Sector is already feeling squeezed by the newly minted Renters’ Rights Act, potentially reducing supply and contributing to rent increases. Letting agents will need to adapt by offering guidance on tax planning, portfolio management, and strategies to navigate these higher costs.
Ultimately, the Budget signals a clear shift in the landscape for landlords, agents, and the Private Rented Sector. Landlords, agents, and tenants alike will need to carefully monitor how these reforms play out in practice, as the Government continues to balance fiscal objectives with the need to maintain a healthy, functioning rental market.
This article is intended as a guide only and does not constitute legal advice. Visit gov.uk for more information.