Amid further press speculation as to proposed changes prior to this weeks’ Budget, we finally know what is actually in store for landlords over the next couple of years.

Hot on the heels of the recent raft of new legislation affecting the property market, the Chancellor’s speech sees further announcements targeting landlords

Charles Dickens famously wrote of himself “No landlord is my friend and brother“ (The Uncommercial Traveller 1860-1861) and you would be forgiven for thinking this reflects the Government’s view when considering the challenges the new announcements will bring.

Turning first to the Budget, Rachel Reeves, the Chancellor of the Exchequer announced two main changes:

Firstly an increase in the rate of income tax payable on rental income, with landlords paying an additional 2% on rental income from April 2027. This means that landlords will pay tax at 22%, 42% or 47% depending on their income levels. By way of a small compensation, income tax relief for mortgage interest is currently provided at 20% but this will increase at the same time to 22%.

Following much speculation, homes worth than £2million will be subject to a “mansion tax” from April 2028. An annual charge will be levied on the owners of the property based on the property’s value as follows:

It will be interesting how landlords react to these changes however the impact of the above is over time likely to be increased rents to offset additional costs, although we may see landlords with a lower rental yield being forced to sell.

The above changes are just the tip of the iceberg for landlords who are also facing further administrative and cost burdens with the recent passing of the new Renters’ Right Act. This sets out amongst other things the abolition of section 21 “no- fault” evictions, the end of fixed term tenancies, strengthened local authority enforcement, restricting the amount of rent which can be demanded in advance and creating a new private sector database.

Whilst no one would want to stop the introduction of measures which ensure safer homes and stability for tenants,  these new measures target the responsible landlords as well as the unscrupulous ones. This new Act received Royal assent at the end of October 2025 and will be implemented in phases with initial changes taking effect from 1 May 2026.

Making Tax Digital

In addition to the above, April 2026 sees the start of Making Tax Digital “MTD” for Income Tax.   MTD is part of the Government initiative to modernize the tax system, by requiring landlords and sole traders to maintain and submit records of their property income and allowable expenses digitally and to submit quarterly online reports followed by a final annual return (replacing the current self-assessment tax return).

Initially being introduced in April 2026 for qualifying individuals whose gross income is above £50,000, it will be extended in 2027 to those with gross income of £30,000 and then again in 2028 the threshold will reduce to £20,000.

This will inevitably see a rise in costs for landlords, both from the increased administration fees and additional penalties for late filing, albeit HMRC have announced that no penalty will be charged in 2026-27 as the initial wave is implemented.

So all in all, the rental landscape is changing further still with both tax and regulatory changes taking effect and with many landlords being forced to review the viability of their rental portfolios in light of these changes.

For any help with your tax affairs, including the requirements under Making Tax Digital, please contact your usual Shaw Gibbs contact.