It’s been calculated that landlords could face almost £500 in additional tax per property per year, thanks to John Healey’s Budget.
The Lettings Partnership has modelled the estimated annual income, operating costs, and tax liabilities associated with an average buy-to-let property, and how that changes from the tax increase on landlords announced by Healey last week.
This was when he confirmed that property income tax rates will rise to 24%, 44%, and 49% from April 2027, doubling the previously planned two-percentage-point increase.
The Letting Partnership modelled the income and operating costs associated with a typical buy-to-let property, valued at £250,000 and generating £1,406 in monthly rental income, based on the latest ONS rental figures.
After accounting for the average cost of typical allowable deductible expenses such as letting and management fees (£1,687), repairs and maintenance (£2,500), landlord insurance (£285), and accountancy and legal fees (£300), the analysis found that a landlord could generate approximately £12,100 in annual taxable rental profit.
Under current income tax rates, a basic-rate landlord would pay £2,420 in tax on this profit. However, from April 2027, this would increase to £2,904, an additional £484 per year.
The same £484 increase would apply to landlords paying the higher and additional rates of income tax, assuming their rental profits fall within the respective basic, higher, and additional rate tax bands.
While landlords with mortgages will continue to benefit from mortgage interest tax relief, which will increase in line with the new property basic rate, the changes will nevertheless increase the tax payable on rental profits.
The financial impact becomes considerably more substantial when viewed across an entire rental portfolio.
Based on industry research indicating that the typical landlord portfolio comprises 7.2 properties, The Letting Partnership estimates that a landlord with comparable rental profits across their properties could face an additional £3,485 in annual tax liabilities.
This represents a significant additional expense for landlords who are already contending with rising property maintenance costs, ongoing regulatory requirements, and the financial implications of recent rental reforms.
The increase also comes just months after the implementation of the Renters’ Rights Act in May, which introduced sweeping changes to the private rented sector, including the abolition of Section 21 no-fault evictions and the transition to periodic tenancies.
With further requirements still to come, including the introduction of the national landlord registration system, landlords face an increasingly demanding operating environment at a time when the Government is also moving to take a larger share of their rental profits.
