Chancellor John Healey announces a further 2% increase in property income tax: Takeaways for advisers and landlords

Chancellor John Healey has just announced a further 2% increase in property income tax, taking the rates payable by landlords holding properties in their own names to 24%, 44% and 49% from April 2027.

Steve Cox, Chief Commercial Officer at Fleet Mortgages, said the move could encourage more landlords to consider limited company ownership, with Fleet’s latest Rental Barometer showing that 71% of buy-to-let mortgage applications in Q3 were made through limited companies, compared to 78% in the previous quarter.

“The further increase in property income tax is likely to make many landlords reconsider how they hold their rental properties, particularly those with larger portfolios who may already be paying higher rates of income tax.

“Our latest Q3 Rental Barometer showed that 71% of buy-to-let mortgage applications in Q3 were made through limited companies, compared to 78% in the previous quarter, suggesting there had been some movement back towards individual borrowing. However, with property income tax rates now set to rise even further than previously announced, we would not be surprised to see more landlords considering whether they should continue to hold their properties in their individuals names or explore instead the potential benefits of limited company ownership.

“Of course, incorporation will not be appropriate for every landlord, and there are costs and tax implications involved in transferring existing properties into a company structure. However, for those considering their next purchase or reviewing their existing borrowing arrangements, the difference in tax treatment is becoming an increasingly important consideration. At a time when the private rental sector needs continued investment to meet tenant demand, there is also a wider question about the cumulative impact of tax changes on landlords’ willingness to invest. We would expect advisers to see more landlords reviewing their options in the months ahead, particularly as the April 2027 implementation date approaches.”