Budget 2025 Tax Changes For Landlords Explained

Chancellor Rachel Reeves has raised the rates of tax on property and investments, so income from assets is taxed more fairly, which, in government speak, means landlords will pay more tax.

In her Budget 2025 speech, Reeves highlighted that landlords and other investors pay less tax than employees or the self-employed, as no national insurance contributions (NICs) are paid on their income.

The Chancellor claims a landlord earning £25,000 a year from property income pays £1,000 less income tax than an employee or self-employed worker on the same income, thanks to the non-application of NICS.

To make up the difference, Reeves announced new tax rates will apply to property, savings and investment income.

Tax rates landlords must pay

Many landlords are paid dividends from the profits of their property companies.

Savings and dividends already have their own tax rates, but these will be subject to an additional 2 per cent surcharge.

The ordinary dividend tax rate will rise from 8.75 per cent to 10.75 per cent, and the upper rate from 33.75 per cent to 35.75 per cent from April 2026. The additional rate will remain unchanged at 39.35 per cent.

All shareholders and directors of a property company can claim an annual £500 dividend allowance in addition to their £12,570 a year personal income tax allowance.

Tax on savings also increases by 2 per cent across all income bands. The basic rate will rise from 20 per cent to 22 per cent, the higher rate from 40 per cent to 42 per cent, and the additional rate from 45 per cent to 47 per cent. The rates rise in April 2027.

Property profits subject to income tax will rise from April 2027. The basic rate will be 22 per cent, the property higher rate will be 42 per cent, and the property additional rate will be 47 per cent. Finance interest relief on mortgages and other loans will be charged at 22 per cent.

Other Budget 2025 policies for landlords

Property income of less than £1,000 remains tax-free, but landlords with annual gross property income of more than £1,000 can either claim the tax-free £1,000 allowance or deduct relevant expenses.

Reeves did not change the corporation tax rates.

General income tax rates are unchanged, with thresholds frozen for an extra three years beyond the current freeze, which lasts until April 2028.

The policy is called fiscal drag because, as incomes rise over the years, more taxpayers are dragged into paying a higher rate of tax.

Here's how the thresholds stand until April 2031:

Band	Threshold	Tax rate	New property rate
Personal allowance	£12,570	Zero	Zero
Basic rate	£12,571 - £50,270	20%	22%
Higher rate	£50,271 - 125,140	40%	42%
Additional rate	Over £125,140	45%	47%

Source: HMRC and HM Treasury

Capital Gains Tax rates and thresholds remain unchanged for landlords disposing of residential property.

How much CGT a landlord pays depends on how much they earn, the value of the property and when the disposal was made.

For more information, check out HMRC's online CGT guidance