Budget tax raid could hit landlords for £3,500 a year
Budget tax raid could cost landlords almost £3,500 a year as property income tax rises
Landlords could face almost £500 in additional annual tax per property, rising to nearly £3,500 across an average portfolio, following the Autumn Budget decision to double the previously planned increase in property income tax rates from April 2027.
New analysis by The Letting Partnership, which examined the impact of the Government’s latest tax changes on rental profitability, modelled the estimated annual income, operating costs, and tax liabilities associated with an average buy-to-let property, before calculating the potential additional tax burden across a typical landlord portfolio.
Property income tax rises by four percentage points
The Autumn Budget confirmed that property income tax rates will rise to 24%, 44%, and 49% from April 2027, doubling the previously planned two-percentage-point increase.
To demonstrate the potential financial impact, The Letting Partnership modelled the income and operating costs associated with the average 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.
Average landlord portfolio could face £3,500 annual increase
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 (Q2 2026), 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.
Chris Mason, Chief Operating Officer at The Letting Partnership, commented:
“The Chancellor has effectively doubled down on the tax increases already heading landlords’ way, and while an additional £484 per property might not sound particularly dramatic in isolation, it quickly becomes a substantial financial burden for those managing multiple rental homes.
What’s particularly concerning is the timing. Landlords are already adjusting to some of the most significant changes to the private rented sector in years following the introduction of the Renters’ Rights Act, with further regulatory requirements still on the horizon. Increasing their tax burden by an even greater margin than originally planned is a real kick whilst they’re already down.
Nobody is suggesting that landlords should be exempt from taxation or regulation, but there has to be a balance. The Government needs to recognise the cumulative impact of these changes, because continually squeezing the financial viability of rental property ownership risks undermining landlord confidence, discouraging investment and ultimately reducing the supply of homes available to tenants.”
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