Autumn Budget Confirms Mansion Tax and Higher Income Tax for Landlords

The Chancellor's recent Autumn Budget delivered two significant tax announcements that will directly impact the property sector. Whether you own a premium property or generate rental income, these changes deserve your attention.

The Two Big Tax Hits

The headline announcements include a new "super council tax" on homes valued above £2 million—often referred to as a mansion tax—and a 2% increase across all landlord property income tax rates. The Government expects these measures to raise around £400 million from the mansion tax and £2.1 billion from higher property, dividend, and savings income tax combined.

As the Chancellor put it, the aim is to ensure that "a £2 million mansion doesn't pay less tax than a family home."

Mansion Tax: What You Need to Know

When: From April 2028

What: A new annual charge on properties valued over £2 million, on top of existing council tax

How it works: Properties will be placed into value-based bands, with charges rising each year in line with CPI inflation from 2029–30 onwards.

This announcement adds significant pressure to the prime property market, particularly in London where demand has already softened due to proposed changes to non-dom rules. Many international buyers are now choosing to rent rather than purchase, which could reshape the luxury rental market.

Higher Income Tax for Landlords: The Details

Landlords were hoping for relief after recent financial pressures—mortgage interest relief restrictions and stamp duty surcharges have already hit the sector hard. Unfortunately, the Budget confirmed a further blow: a 2% increase across all property income tax bands, effective from April 2027.

The new rates will be:

• 22% basic rate (up from 20%)
• 42% higher rate (up from 40%)
• 47% additional rate (up from 45%)

These rates apply across England, Wales, and Northern Ireland.

The Government's Rationale

The Chancellor justified the increase by highlighting a perceived fairness issue: a landlord earning £25,000 a year from property currently pays less tax than a tenant earning the same income, due to National Insurance differences. Rather than adjusting National Insurance rules, the Government has opted to raise landlord income tax rates instead.

What This Means for Your Business

The combination of mansion tax and higher income tax rates represents a significant shift in the Government's approach to property taxation. For professional landlords, this means:

• Planning is essential: With mansion tax starting in 2028 and income tax increases effective 2027, now is the time to review your tax position and consider your strategy
• Profitability impact: Higher tax rates will reduce net rental income, affecting investment returns and refinancing decisions
• Market effects: These changes may accelerate exits from the sector, potentially creating opportunities in well-managed properties and professional landlord services

Looking Ahead

The property sector faces an increasingly challenging tax environment. Combined with the Renters' Rights Act reforms coming in May 2026, landlords need to be proactive about compliance, tax planning, and operational efficiency.

Ready to navigate these changes? Our team can help you understand the impact on your specific situation and develop a strategy to protect your investment.

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