There’s been a surprise response from one lettings agency giant to the increase in property income tax imposed on landlords, announced in the Budget.
Chancellor Rachel Reeves announced that from April 2027, a 2% increase will be imposed on basic, higher and additional rates of property income tax, increasing them to 22%, 42% and 47% respectively.
This is estimated to yield £0.5 billion a year on average from 2028-29. The Office for Budget Responsibility says: “The costing incorporates a small negative impact as a result of the pass-through of the tax increasing rents and property tax receipts, which is more than offset by a reduction in house prices reducing other receipts.”
In response, Aneisha Beveridge – head of research at Hamptons, part of the Connells empire – says: “On its own, adding 2% to headline rates of income tax charged on property income isn’t going to break the bank. It will add around £70 a year to the tax bills of both lower-rate and higher-rate taxpayers with homes in their personal names, significantly less than adding National Insurance to rental income.
“However, given the way landlords are taxed, if their mortgage interest credit isn’t also increased in line with the rise, it could add up to £227 to average landlord tax bills.
“This was another Budget in which landlords have faced a tax hike, albeit a relatively small one. The ‘successive eroding of landlord returns’, as the OBR puts it, will provide an additional incentive to the 80% of landlords with homes in their own names either to sell up or move homes into a company structure. Recent months have seen the number of new buy-to-let companies surpass the six thousand mark, meaning a record 70,000 companies are likely to be set up this year.”
| Average landlord pre-budget | Average landlord post budget (if mortgage interest credit is increased with headline tax rates) | Average landlord post budget (if mortgage interest credit is not increased with headline tax rates) | |
| Rental Income | £16,478 | £16,478 | £16,478 |
| Mortgage % | 5.25% | 5.25% | 5.25% |
| Mortgage payment | £7,875 | £7,875 | £7,875 |
| Annual pre-tax profit | £3,495 | £3,495 | £3,495 |
| Tax bill – lower rate | £699 | £769 | £926 |
| Tax bill – higher rate | £2,973 | £3,043 | £3,200 |
Source: Hamptons
This article is taken from Landlord Today