On Wednesday 28 October, Chancellor John Healey delivers his first Budget, and between now and then almost every property headline will contain the word "could". Could capital gains tax be pulled into line with income tax? Could the so-called mansion tax start at £1.5 million instead of £2 million? Could National Insurance reach rental income? Some of it will turn out to be real and a lot of it won't, which makes the next three weeks a poor time to make an irreversible decision on the strength of a newspaper leak. A better habit is to sort everything you read into two piles: measures already written into law or formally announced by the Treasury, and measures that exist only as reporting. The first pile comes with dates and numbers. The second comes with headlines. What follows is the first pile, priced for real landlords and owners, then a plain account of the second, and a short list of what is worth doing before Budget day.
What is already fixed, whatever the Chancellor says
From 6 April 2027, rental profit stops being taxed at the ordinary income tax rates and gets a set of its own: 22% at the property basic rate, 42% at the higher rate and 47% at the additional rate. Each is two points above today's 20%, 40% and 45%. That is section 7 of the Finance Act 2026, not a proposal, and HM Treasury's own explainer says the aim is to narrow the gap between tax on work and tax on assets, because rent, unlike wages, carries no National Insurance. The Treasury says the rates apply across England, Wales and Northern Ireland, with Scotland and Wales to be given powers to set their own property income rates, so a landlord in either place should watch what their own government decides before assuming the same figures. It also points out that more than 90% of taxpayers have no taxable property income at all, which is a fair reminder that this lands on a minority, but a minority that includes a lot of people reading this blog.
Mortgage interest is the other half of the sum. Landlords who own in their own names cannot deduct finance costs from rent; they get a tax credit instead, and from April 2027 that credit is set at the new property basic rate of 22%. A higher-rate landlord is therefore taxed at 42% on profit but relieved at only 22% on interest, which is the same lopsided shape as today's 40% and 20%, just two points higher on both sides. Treasury papers also change the order in which allowances are applied, so the Personal Allowance is used against employment, trading and pension income before property income. If your income is a mix of salary or pension and rent, ask an accountant to rerun your 2027-28 figures rather than trusting a rule of thumb from a blog post, this one included.
Further out, the High Value Council Tax Surcharge starts in April 2028 for owners of English homes worth £2 million or more. The charge is £2,500 a year for homes between £2 million and £2.5 million, £3,500 up to £3.5 million, £5,000 up to £5 million and £7,500 above that, rising with CPI inflation from 2029-30. The owner pays, not the occupier, so on a let property the bill goes to the landlord. The Treasury expects fewer than 1% of English properties to be caught and says the Valuation Office will run a targeted exercise to identify them, using values from 2026.
Then there is Making Tax Digital for Income Tax, which already applies to landlords whose gross income from property and self-employment passed £50,000 in 2024-25. If your combined gross income was over £30,000 in 2025-26, you start on 6 April 2027, and if it was over £20,000 in 2026-27, you start in April 2028. The test uses gross rent, not profit, so a landlord with £32,000 of rent and thin margins is in. Quarterly updates are due by 7 August, 7 November, 7 February and 7 May, and HMRC's guidance puts the first update for the 2027-28 year at 7 August 2027.
What the two-point rise costs a real landlord
For most people with a normal mortgage, the answer is a few hundred pounds a year, not a few thousand. The sums below assume the whole profit sits in one tax band, interest is fully relievable and no other allowances come into play. They are illustrations, not your bill.
| Landlord | Rental profit before interest | Mortgage interest | Tax in 2026-27 | Tax in 2027-28 | Extra a year |
|---|---|---|---|---|---|
| Higher-rate, mortgaged | £18,000 | £7,000 | £5,800 | £6,020 | £220 |
| Basic-rate, mortgaged | £12,000 | £4,000 | £1,600 | £1,760 | £160 |
| Higher-rate, no mortgage | £15,000 | nil | £6,000 | £6,300 | £300 |
| Additional-rate, no mortgage | £40,000 | nil | £18,000 | £18,800 | £800 |
The pattern behind the figures is simple. Take your rental profit before mortgage interest, subtract the interest, and 2% of what is left is your extra annual bill, because the credit rises by two points along with the rate. The first row shows it: £18,000 less £7,000 leaves £11,000, and 2% of that is £220. Owners with no borrowing feel the full two points on every pound of profit, which is why the unmortgaged landlord in row three faces a bigger increase than the mortgaged higher-rate landlord in row one, even though the profit is lower.
The catch is that the arithmetic flatters anyone whose interest bill is large compared with their profit. The credit is limited to the lowest of your finance costs, your property profits and your income above the Personal Allowance, so a landlord with heavy interest and a thin margin may not get the relief the table assumes. And the real figure climbs if extra profit tips a basic-rate landlord into the higher band for the first time, because every pound above the line is then taxed at 42% instead of 22%.
The rumours, and who is saying them
None of what follows is policy.
Capital gains tax first. Residential property gains are currently taxed at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, after a £3,000 annual exempt amount in 2026-27, according to GOV.UK. Which? lists CGT reform among its Budget rumours and notes that Louise Haigh, the First Secretary of State and an ally of Prime Minister Andy Burnham, has argued in an essay for the Renewal journal for aligning it more closely with income tax bands. Nothing has been announced. To see what is at stake, take a taxable gain of £60,000 after the exempt amount: at 24% the tax is £14,400, and at a hypothetical 40% it would be £24,000. That £9,600 gap explains the anxiety, and it explains why the temptation to sell in a hurry is strong.
Resist it. A disposal for CGT purposes happens when contracts are exchanged, not when the sale completes, and Budgets can bite on the day, as the October 2024 one did when it lifted the main CGT rates on shares and other assets from 30 October itself. So only an exchange before 28 October could sidestep a same-day change, and a sale that is not already at contract stage is unlikely to get there in 24 days. A price cut to force the pace can easily cost more than the tax it saves.
The mansion tax threshold is the best-sourced rumour of the three. The Times reported in mid-September, and Reuters relayed, that the Treasury is considering cutting the surcharge threshold from £2 million to £1.5 million. Which? puts the numbers at roughly 165,000 homes in scope now against about 271,000 at the lower line. If your home or let property sits between £1.5 million and £2 million, do not re-mortgage or sell on this basis. Get a written valuation now instead, so that you have a baseline if the Valuation Office's figure ever differs from yours.
National Insurance on rent keeps resurfacing in pre-Budget commentary, and the Treasury's own line about rent carrying no National Insurance gives the idea something to hang on. That is an inference from a sentence, not a plan, and no proposal has been published. On stamp duty and council tax, Which? reports no immediate changes planned, which ends a summer of speculation about a land value tax that the Prime Minister had once voiced support for.
Before 28 October, and what to leave alone
Work out your own 2027-28 number now, per property: rent, running costs, interest, then the 2% rule from the table above. It takes an evening with a spreadsheet and turns a vague worry into a figure you can compare with the rumours. Most small landlords will find it is a few hundred pounds, and a few will find it is a good deal more.
Leave incorporation alone unless an accountant has modelled it. Moving properties you own personally into a company is treated as a sale at market value, so it can trigger stamp duty land tax and capital gains tax up front, and the reliefs that might soften that are narrow. Doing it to dodge a two-point rise, or in a panic over a rumour, is the wrong way round.
Do not plan to pass the rise on to a tenant by pushing the rent early. Under the Renters' Rights Act a rent increase goes through a Section 13 notice, once a year at most, and a tenant can challenge it at the First-tier Tribunal, which looks at what the property would let for on the open market and not at your tax bill. A £160 to £300 annual increase works out at roughly £13 to £25 a month, which is not a number that will carry a disputed rise.
If your gross rent is anywhere near £30,000, start keeping digital records this autumn, so that April 2027 is a software login and not a scramble through shoeboxes. And note the date after the Budget: the Bank of England announces its next rate decision on 5 November, with Bank Rate at 3.75% at the last meeting, which will matter to anyone remortgaging more than most Budget measures will.
On the afternoon of 28 October, skip the live blogs and look for the Treasury's "Overview of tax legislation and rates" document on GOV.UK, the same publication that carried the 2027 property income rates last time. A measure that has a start date in it is real. Everything else is still a headline.