The Autumn Budget’s confused signalling, long lead times and heavy hit on property investors have left the housing market braced for years of volatility.

Measures announced by the Chancellor – including a delayed mansion tax and sharp income-tax increases for rental investors – are creating a two-tier market in which personal landlords face escalating tax bills and shrinking margins, while incorporation becomes increasingly attractive.

The headline reforms, many of which sit years away from implementation, are already reshaping investor behaviour.

The freezing of income-tax thresholds, combined with additional tax rises scheduled for 2027, is expected to push thousands more landlords into higher-rate bands, accelerating rent inflation and prompting renewed sell-offs in the buy-to-let sector.

Indeed the package, taken as a whole, hands the steepest costs to savers, business owners and rental investors – groups already under pressure from higher borrowing costs, tightening regulation and stagnant real incomes.

Against that backdrop, Roger Morris, group distribution director at Chetwood Bank, this morning chaired a deep-dive webinar session, Demystifying The Autumn Budget 2025, with John McCaffery, tax partner at Alexander & Co Chartered Accountants, who called it “a really, really weird Budget”, and described it as heavily leaked, politically symbolic, and in several areas unlikely ever to be implemented.

MANSION TAX

McCaffery said the proposed mansion tax on homes valued above £2 million – set across four bands at £2,500 to £7,500 annually – was the obvious headline but “potentially a complete non-issue”.

Scheduled for April 2029, it would only enter law if the current government secured a second term.

With a general election due no later than summer 2029, he predicted that any incoming administration would “kibosh completely” any unfunded or politically inconvenient measures before they came into force.

Delays, he added, were partly administrative, as the system would require updated national valuations – a process he said was “massively out of date” even for existing council tax bands.

But it also reflected political signalling, allowing the Treasury to appear to target wealth without impacting the current fiscal arithmetic.

INCOME TAX

Far more significant for the property sector, McCaffery said, is the broad-based rise in income tax from April 2027.

Dividend income, interest income and rental income will each attract an additional two percentage points in tax, with only a narrow exception for the additional dividend rate, which remains at 39.35%.

He said that the decision to spare the highest band from a further rise was “surprising”, speculating that it may reflect concerns about the growing number of high-net-worth individuals leaving the UK following the abolition of the non-dom regime.

NEGATIVE CONSEQUENCES

For landlords, the consequences are immediate and largely negative. Basic-rate property tax will rise from 20% to 22%, higher-rate from 40% to 42% and additional-rate from 45% to 47%. Combined with frozen thresholds and rising rents, many landlords will be pushed into higher tax bands sooner, while still facing restricted mortgage interest relief.

McCaffery pointed to a “tiny silver lining” in the Budget documentation: the existing 20% mortgage-interest tax credit will rise to 22%.

But he emphasised that this does little to offset the broader effect of fiscal drag, with landlords facing higher marginal rates while receiving only limited interest relief.

As a result, landlords are reporting immediate intentions to raise rents.

Morris said owners with personally held mortgages – still the majority of UK landlords – are already planning above-inflation rent increases simply to “stand still” financially.

But those increases themselves risk pushing more investors into higher-rate tax bands, creating what McCaffery described as a “self-fuelled cycle” of higher rents, higher income and higher tax.

MORE TAX

Landlords earning £20,000 a year will see around £400 added to their annual tax bill, rising to roughly £800 for those earning £40,000, according to McCaffery’s calculations. For higher earners with multiple properties, the impact is substantially greater.

The webinar also explored restructuring options. These included selling properties and reinvesting through an SPV; transferring beneficial ownership between spouses, using deeds of trust and HMRC Form 17; and preparing partnership structures that could enable a future tax-efficient incorporation.

McCaffery warned that transfers involving mortgaged properties can trigger stamp duty on the debt being transferred but emphasised that spousal transactions attract the basic, not the higher, stamp-duty rate.

“Tax follows beneficial ownership,” he said, and landlords must ensure that declarations of trust and Form 17 submissions are accurate and timely.

As the session closed, both speakers agreed that the Autumn Budget marks a decisive shift in the financial landscape for private landlords.

For many, the choice will now be stark: restructure, incorporate or exit the sector entirely.