The Chancellor has delivered the 2025 Budget, outlining a wide range of fiscal changes that will affect individuals, businesses and the housing sector. EMPO have produced an overview, for their members, of the measures most relevant to landlords and the wider private rented sector.
Tax Changes Affecting Landlords
1.Increase in Tax on Property Income
From April 2027, tax rates applied to property, savings, and dividend income will rise by 2 percentage points.
New rates will be:
- Basic rate: 22%
- Higher rate: 42%
- Additional rate: 47%
The government stated that this measure aims to address differences in how various types of income are treated for tax purposes.
The Office for Budget Responsibility (OBR) has cautioned that further reductions in landlord returns may decrease long-term rental supply, potentially placing upward pressure on rents if demand continues to exceed available properties.
2. High-Value Property Surcharge
A new annual surcharge will apply to properties worth more than £2 million from 2028:
- £2,500 for homes valued between £2m and £2.5m
- Up to £7,500 for homes valued at £5m+
The measure is aimed at rebalancing council tax contributions, with the government indicating it will affect around 1% of properties.
3. Changes to Capital, Savings and Other Taxes
- Dividend, property, and savings income will all incur an additional 2 percentage points in tax (as above).
- Capital gains tax relief on business sales to employee ownership trusts will be reduced from 100% to 50%.
- A range of other tax increases were announced, including higher taxation on gambling, electric vehicle mileage, and digital ride-hailing services.
4. Broader Personal Finance Measures
These may impact landlords indirectly:
- State pension: Rise of £440 per year for the basic pension and £575 for the new state pension.
- ISA reforms: Annual allowance for cash ISAs will fall from £20,000 to £12,000 (over-65s retain £20,000 limit).
- Frozen fuel duty until September next year.
- Mileage tax for electric vehicles from 2028.
5. Housing, Tenants and Welfare-Related Measures
- Two-child benefit cap will be removed from April 2026.
- Energy bills are planned to fall by £150 on average from April due to levy changes, including the scrapping of the Energy Company Obligation scheme.
- Training support expanded for under-25s via a new Youth Guarantee.
- No new measures to unfreeze Local Housing Allowance or incentivise greener rental homes, points highlighted by sector organisations.
6. Impact on the PRS: Sector Response
Several industry bodies and commentators have raised concerns about the potential impact of these tax changes:
- The OBR warns that reduced landlord returns may lower rental supply over time.
- Industry leaders suggest higher taxation could prompt more landlords to exit the market, contributing to further upward pressure on rents.
- Organisations highlight the need for policies that support rental supply alongside tenant protections.
While the Budget did not extend National Insurance to rental income, it also omitted reforms sought by landlord associations, including changes to Local Housing Allowance and Capital Gains Tax.
Summary
The 2025 Budget introduces significant changes across income taxation, high-value property charges, personal finance rules, and welfare. For landlords, the most direct impacts come from the increased tax rates on property income and the introduction of a high-value property surcharge. Independent analysis suggests the changes may influence long-term rental supply, though the government argues they support fairness within the wider tax system.
EMPO Support for Landlords
At EMPO, we remain committed to supporting landlords through legislative and economic change. As the sector navigates the implications of the 2025 Budget, we will continue providing guidance, resources and advocacy to help you make informed decisions and protect your investments.
To support landlords further, we will be hosting a FREE Post-Budget Tax Debrief for Landlords with Rogers Spencer on 2nd December. This webinar will offer expert insight into the tax changes and what they mean for your portfolio.
Register for free here: https://empo.co.uk/event/post-budget-tax-debrief-for-landlords-rogers-spencer-empo/