What You Need to Know About the UK Government November 2025 Budget  

New income tax rates for property income  

From April 2027, unincorporated landlords (who own and let properties in their own name, not through a limited company) will be taxed at separate property income rates of 22% (basic), 42% (higher), and 47% (additional). This is an increase of 2% from current rates and will impact rental profits for landlords.  

Relief for mortgage interest and other finance costs  

From April 2027, finance costs (e.g. mortgage interest) will be relieved via a flat 22% tax credit (rather than at the landlord’s marginal rate). This means that for every £1 of mortgage interest you pay on a rental property, you’ll get a tax credit worth 22p taken off your tax bill – this applies to everyone, regardless of your tax band.   

The £1,000 property income allowance and the Rent a Room scheme will continue.  

Personal allowance ordering rules  

From April 2027, your tax-free personal allowance will be used up by your wages, pension, or self-employed trading income first. Only if there is anything left over will there be a reduction in the tax on your rental income. This means more of your rent could be taxed at the new property rates of 22%, 42%, or 47%.  

High Value Council Tax Surcharge   

Also known as “mansion tax”, an annual surcharge will be introduced from April 2028 on properties valued over £2m (based on their value in 2026). This will affect the owners of higher-value homes, including second homes and investment properties.   

Bands:   

• £2,500 (£2m–£2.5m)  
• £3,500 (£2.5m–£3.5m)  
• £5,000 (£3.5m–£5m)  
• £7,500 (over £5m)  

This is expected to raise approximately £430m a year.   

International reporting of real estate income  

Real estate income (see point 4.156) will become part of an international exchange of information programme to increase transparency and reduce tax evasion, expected from 2029 or 2030. This will impact landlords and owners with overseas elements (e.g. non-UK residents, or those will overseas property).  

Market impact on rents and supply  

NRLA estimate typical rents in England could rise by £20-£25 per month as a result of the changes, on top of prior pressures from Mortgage Interest Relief and Stamp Duty changes.  

Other related tax changes that may affect some property investors  

Dividend tax  

• Rates rise by 2 percentage points from April 2026 to 10.75% (basic) and 35.75% (higher).  
• The additional rate stays 39.35%.  
• This is relevant to landlords using companies and paying themselves dividends.  

Savings income tax  

• Rates rise by 2 percentage points from April 2027 to 22%, 42%, or 47%.   
• The amount you can pay into a cash ISA will drop to £12,000 in April 2027. 
• 90% of taxpayers are not expected to have taxable savings/dividend income, but for those who do, the impact could be significant depending on amounts.  

You can find the full 2025 Budget documents on the UK Government website.