On 26 November 2025 the Chancellor delivered the Autumn Budget. For UK landlords running property in their personal names, the headline news was not in any single measure but in the cumulative weight of three rate moves and one freeze, each commencing at a different date between 6 April 2026 and April 2028. This guide walks the stack in the order it lands and models the actual cash effect on a higher-rate landlord.
Throughout, where the rules apply to England only (council tax, SDLT) we say so. The property income surcharge, dividend rises, threshold freeze and cash ISA cap are UK-wide income tax measures and apply equally in Scotland and Wales subject to their own devolved rate adjustments.
1. The property income surcharge — the headline change
From 6 April 2027, property income received by individuals is taxed at rates that are 2 percentage points higher than the equivalent rates on other non-savings, non-dividend income. The new property income rates are:
| Band | Other non-savings, non-dividend income | Property income from 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
The mechanic is a separate rate schedule for property income, not a surcharge bolted onto the final tax bill. Property income is identified inside the self-assessment calculation and the new rate is applied directly. Joint owners are each taxed on their share at their own marginal property-income rate.
Crucially, the 20% basic-rate finance-cost tax reducer rises to 22% to match the new basic rate. This keeps the Section 24 mechanic intact: mortgage interest is relieved at the basic rate on property income, not at the higher or additional rate. Higher-rate landlords still get the worse end of Section 24 — they now pay 42% on gross rent and recover only 22% on the interest. The underlying Section 24 mechanics are unchanged; the rates have simply ratcheted up.
The Treasury policy paper is at gov.uk under “Changes to tax rates for property, savings and dividend income”. HMRC's Tax Information and Impact Note costs the measure at around £500m a year by 2029/30 across roughly 1.2 million affected self-assessment landlords.
2. Dividend rate rises — already in force from April 2026
From 6 April 2026, the basic and higher dividend rates rose 2 percentage points; the additional rate is unchanged:
| Band | 2025/26 dividend rate | 2026/27 dividend rate |
|---|---|---|
| Basic | 8.75% | 10.75% |
| Higher | 33.75% | 35.75% |
| Additional | 39.35% | 39.35% |
The dividend allowance remains £500. The rise affects limited company landlords who extract retained profit via dividend rather than salary. For a higher-rate director-shareholder drawing a £30,000 dividend on top of a £12,570 salary, the additional tax bill is around £225 a year — small in isolation, but it compounds with the corporation tax already paid at company level. The effective end-to-end rate on £1 of corporate profit extracted as dividend to a higher-rate director now sits around 51.7% (25% corporation tax then 35.75% on the post-tax 75p), versus 51.25% under the prior schedule.
Practical move: review whether your dividend timing is optimal across the new tax year. Where retained profits permit, accelerating a dividend into 2025/26 before 6 April 2026 captured the old rates one final time; from 2026/27 onward, salary-up-to-NI-threshold plus a smaller dividend remains the standard playbook.
3. The High Value Council Tax Surcharge — “mansion tax”
From April 2028, residential properties in England valued above £2 million will face an annual additional council tax charge — the High Value Council Tax Surcharge (HVCTS), branded by Treasury and the press as the “mansion tax”. There are four bands:
| Property value | Annual HVCTS |
|---|---|
| £2,000,001 – £2,499,999 | £2,500 |
| £2,500,000 – £3,499,999 | £3,500 |
| £3,500,000 – £4,999,999 | £5,000 |
| £5,000,000 and above | £7,500 |
Key features:
- Owner pays. HVCTS is paid by the property owner regardless of whether the property is owner-occupied, let, or empty. There is no tenant liability.
- Valuation date. Treasury guidance indicates the valuation reference date will be 1 April 2026, with valuations completed during 2026/27 ahead of April 2028 commencement. Final mechanism in 2026/27 secondary legislation.
- Threshold is a cliff edge. A property at £2,000,001 enters the lowest band. A property at £1,999,999 does not.
- Bands uprated by CPI. The £2m threshold rises with CPI from 2029 onwards.
- England only. Council tax is devolved — Scotland and Wales have not announced equivalent measures at time of writing.
Treasury costings assume around 100,000 properties fall in scope at 2028 commencement. Practical landlord implications:
- Buy-to-let owners holding high-value London or Home Counties stock should model HVCTS as a permanent annual operating cost in their IRR. A £5,000 annual surcharge on a property generating £45,000 gross rent shaves around 11% off net cashflow.
- Joint ownership does not split the bill. HVCTS is a property-level charge, not an income-tax charge.
- The £2m cliff edge creates a planning band. Properties valued £1.8m to £2.2m sit in a zone where the valuation appeal route will matter.
4. Income tax threshold freeze — extended three more years
The personal allowance (£12,570) and the higher-rate threshold (£50,270) were already frozen until April 2028 under the previous government's pre-Budget policy. The Autumn Budget 2025 extended the freeze by three further years to April 2031.
Fiscal drag is the silent tax rise. Treasury forecasts that the extended freeze pulls an additional ~1.7 million people into income tax and ~1.2 million into the higher rate by 2031. For landlords, the threshold freeze matters most where rental income is what tips an otherwise-basic-rate taxpayer into the higher band — a particular concern given Section 24 already inflates reportable rental income.
Cross-reference with our ICR underwriting guide: when modelling affordability over a 5-year hold, assume the £50,270 higher-rate threshold is fixed in cash terms through 2030/31. Real-terms wage growth pushes more landlords past that line every year.
5. Cash ISA cap — £12,000 for under-65s
From 6 April 2026, the annual cash ISA limit for savers under 65 is reduced from £20,000 to £12,000. The overall ISA allowance remains £20,000 — the residual £8,000 must go into stocks-and-shares, innovative finance, or Lifetime ISA accounts. Savers aged 65 and over are exempt and retain the full £20,000 cash ISA allowance.
Relevance to landlords: many use cash ISAs as a tax-sheltered deposit pot for the next purchase, particularly through a 12–24 month accumulation cycle. From 2026/27 onwards, £8,000 of that pot has to take market risk inside a stocks-and-shares wrapper or sit outside the tax shelter altogether. For a higher-rate taxpayer earning 4% on £8,000 of cash held outside any wrapper, the annual tax cost is around £128 — small per pound but compounds across multiple years and multiple deposits.
6. What stays the same
The following landlord-relevant rules were not changed at the Autumn Budget 2025:
- Section 24 mechanics. Finance costs continue to be relieved as a basic-rate tax reducer rather than deducted from rental income. From April 2027 the credit rises to 22% (matching the new basic property income rate) but the structure is unchanged.
- SDLT bands and the 5% additional dwelling surcharge. Buy-to-let and second-home purchases continue to pay the higher rates of SDLT introduced in the Autumn 2024 Budget — England and Northern Ireland.
- CGT rates on residential property. 24% for higher-rate disposals, 18% for basic-rate disposals (above the annual exempt amount, which remains £3,000).
- Corporation tax. Small profits rate 19% up to £50,000, main rate 25% above £250,000, marginal relief between. Unchanged.
- Annual Tax on Enveloped Dwellings (ATED). Bands and rates unchanged.
Two non-changes worth flagging because rumours circulated pre-Budget: there was no equalisation of CGT with income tax, and no removal of the 5% SDLT surcharge.
Worked example: a higher-rate landlord under the new stack
Consider a 40% (higher-rate) salaried employee with one personal-name BTL: gross rent £20,000, operating costs (management, voids, insurance, maintenance) £4,000, mortgage interest £10,000. They have employment income of £60,000.
2025/26 (current rules):
- Taxable rental income: £20,000 − £4,000 = £16,000
- Tax at higher rate 40%: £6,400
- Less 20% credit on £10,000 finance costs: £2,000
- Net rental tax bill: £4,400
2027/28 (after Autumn Budget changes commence):
- Taxable rental income: £20,000 − £4,000 = £16,000
- Tax at higher property income rate 42%: £6,720
- Less 22% credit on £10,000 finance costs: £2,200
- Net rental tax bill: £4,520
The headline number — £120 extra tax — looks small on a single property. The shape of the increase is the point: the higher property income rate adds £320 in tax, while the basic-rate credit rising to 22% returns £200 of that. Net annual cost on this profile: around £120 per property per year. For a portfolio of five higher-rate properties, around £600/year. For a £20k-rent, £15k-interest profile (more leveraged), the net cost is around £100/year per property — counterintuitively lower because more of the impact is offset by the larger 22% credit.
The cumulative impact across the stack is larger than the property income surcharge alone: layer in HVCTS where it applies, dividend rises if extracting through Ltd Co, and the threshold freeze pushing more landlords into higher rates, and the total annual cost can run into multiple thousands per portfolio.
The Budget is not a single hit — it is a stack. Each measure is digestible on its own. The compounding effect across 2026, 2027 and 2028 is what changes the underwriting maths on new deals.
What to do now
- Re-run your incorporation maths. Limited company corporation tax (19%/25%) is unchanged. Personal-name rates have moved against you. The gap is wider than it was in October 2025. For higher and additional-rate landlords with 5+ year hold horizons, the incorporation case is stronger than at any point since 2020.
- Rebalance Form 17 splits. If property is jointly owned by spouses or civil partners, the +2pp property income surcharge has increased the saving from routing income to a lower-rate partner. Re-model whether your current declared split (or default 50/50) is still optimal once 2027/28 rates apply.
- Review dividend timing if running a Ltd Co. The 2pp dividend rises are in force from 6 April 2026. Where retained profits permit, the standard playbook of salary up to the NI threshold plus a smaller dividend remains efficient but the dividend element costs slightly more from 2026/27 onward.
- Budget for the £10,000 EPC cap. The PRS minimum EPC C standard arrives in 2030. Capital required for retrofit is rising as a real cost in your ICR planning.
- If approaching £2m, model HVCTS into your IRR. The cliff-edge structure and the 1 April 2026 valuation reference date mean some owners around the threshold will want a defensible valuation in 2027. Estate agents in central London are already marketing valuation services for this purpose.
- Reset cash ISA usage. If you have been accumulating deposit cash in an ISA, plan the 2026/27 cycle around the £12,000 cap. Either accept market risk on the residual £8,000 in a stocks-and-shares ISA or budget for the tax cost of holding it outside the wrapper.
- Speak to a property accountant — not a generalist. The combined interaction of the property income surcharge, Section 24, Form 17 splits, incorporation mechanics and HVCTS is genuinely specialist territory. A high-street accountant who handles a few BTL clients is unlikely to model the stack correctly.
The honest take
The Autumn Budget 2025 was not a step change. There was no abolition of Section 24, no CGT–income tax equalisation, no removal of the SDLT surcharge. What it was, instead, was another layer on a tax structure that has been ratcheting against personal-name landlords for nearly a decade. The +2pp surcharge on its own is digestible; combined with the threshold freeze, the dividend rise and HVCTS for the £2m+ portfolio, it represents an ongoing repricing of the personal-name BTL business model in favour of either incorporation or exit.
For new-acquisition underwriting, the rate to model from April 2027 onwards is 42% for a higher-rate landlord — not 40%. For a Ltd Co acquisition, the headline corporation tax rate is unchanged. The single biggest underwriting change for the next twelve months is to run both scenarios — personal vs Ltd — at the post-2027 rates, not the legacy 2025/26 rates.
Guidance only — not legal or tax advice. The Autumn Budget 2025 measures discussed here include transition rules and secondary legislation triggers (particularly HVCTS valuation mechanics) that will be finalised during 2026/27. Verify against the HMRC TIIN and any Finance Bill 2026 amendments before relying on specific figures for a transaction.
Frequently asked questions
Does the new 2pp property income surcharge apply to limited company landlords?
No. The surcharge sits inside the income tax system and applies only to individuals and partnerships of individuals receiving UK property income. Limited companies pay corporation tax (19% small profits rate up to £50,000, 25% main rate above £250,000, marginal relief between) and are unaffected by the property income surcharge announced at the Autumn Budget 2025. The Budget did not change corporation tax rates. If anything, the +2pp on personal-name property income has widened the rate gap in favour of Ltd Co structures for higher and additional-rate taxpayers.
When does the basic-rate Section 24 credit rise to 22%?
From 6 April 2027 — the same date the property income surcharge takes effect. The 20% basic-rate finance-cost tax reducer rises to 22% to match the new basic rate on property income (which itself moves from 20% to 22%). Higher and additional-rate landlords still receive only the 22% credit on mortgage interest, while paying 42% or 47% on the gross rental income above the relevant threshold — the underlying Section 24 mechanic is unchanged, only the percentages have shifted.
Is the High Value Council Tax Surcharge a council tax or an income tax?
It is a council tax surcharge — an annual additional charge bolted onto the existing council tax band for the property. It is paid by the owner of the property rather than the occupier, and it applies regardless of whether the property is owner-occupied, let, or empty. The four bands announced are £2,500, £3,500, £5,000 and £7,500 per year, applying from April 2028 to residential properties valued above £2 million. Treasury costings assume around 100,000 properties fall in scope.
Will my £2 million valuation be based on purchase price or current market value?
Current market value — not purchase price and not the existing council tax banding from 1991. The Budget documents indicate the valuation date will be 1 April 2026, with the final mechanism (including who carries out the valuations and the appeal route) to be set in secondary legislation during the 2026/27 tax year. Owners of properties around the £2m threshold should expect a valuation exercise in 2027 ahead of the April 2028 commencement. The threshold is a cliff edge — a property valued at £2,000,001 falls in the lowest band; £1,999,999 does not.
Does the dividend tax rise affect me if I take all of my Ltd Co profit as salary?
No. The dividend rate rises (10.75% basic, 35.75% higher, 39.35% additional unchanged, from 6 April 2026) apply only to dividend distributions. Salary is taxed at income tax rates and is also a corporation tax deduction at the company level, so the dividend rise is irrelevant to a salary-only extraction strategy. Many Ltd Co landlords have historically used a small salary up to the National Insurance threshold plus dividends to extract profit tax-efficiently; the +2pp on the basic and higher dividend bands makes that strategy noticeably less attractive at the margin but does not collapse it.
Should I still incorporate after the Budget?
More often than before, yes — but the underlying maths is unchanged: incorporation is a disposal event (CGT and SDLT on transfer, mortgage refinancing) that takes years to amortise. What the Budget did was widen the running-cost gap in favour of Ltd Co. Personal-name property income now faces 42% (higher) or 47% (additional) from April 2027 vs 25% corporation tax on retained profit. The case strengthens for higher and additional-rate landlords with long hold horizons. It does not strengthen for basic-rate landlords (who pay 22% personal vs 19% corporation tax — a much smaller gap once extraction costs are layered in).
Will Form 17 spousal splitting still work after the Budget?
Yes — the mechanics are unchanged. Form 17 with a supporting declaration of trust continues to let jointly-owning spouses and civil partners split rental income unequally for tax purposes, diverting more income to the lower-earning partner's lower marginal rate. With personal-name property income rates rising 2pp from April 2027, the value of routing income through a basic-rate spouse rather than a higher-rate spouse has actually increased — a £10,000 share shifted from a 42% payer to a 22% payer now saves £2,000 a year, up from £1,800 pre-Budget.
What is the cash ISA cap change?
From 6 April 2026 the annual cash ISA limit for savers under 65 is reduced to £12,000. The overall ISA allowance remains £20,000 — the unused balance must go into stocks-and-shares, innovative finance, or Lifetime ISAs. Savers aged 65 and over are exempt and retain the full £20,000 cash ISA allowance. The change matters to landlords using cash ISAs as deposit pots for upcoming purchases: from the 2026/27 tax year you will need to accept market risk (stocks-and-shares ISA) on the £8,000 above the cash cap, or save outside the tax wrapper at non-savings rates.