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Key Takeaways:
- The Autumn Budget 2025 introduces a higher tax rate on rental income and high-value properties.
- London landlords and property owners will feel the impact of the Autumn Budget, as it includes a high percentage of rental properties and properties valued at £2 million and more.
- Frozen tax thresholds until 2031 will make landlords pay more tax even if their income does not increase.
- Landlords need to reassess their letting strategy or ownership structure to minimise the effects of the new tax rates.
- Compliance pressure is increasing as the budget changes will happen alongside the restrictions imposed by the Renters’ Rights Act.
- Optimising rental yields, ensuring compliance, and reducing operational costs are among the solutions landlords can implement to survive the new rental market landscape in London.
A Landlord’s Guide to the Autumn Budget 2025
The Autumn Budget 2025 is bringing several tax changes that will directly affect landlords and property owners in London. The private rented sector is still reeling from the passing of the Renters’ Rights Act. But here comes another change that could compromise their rental income—unless they proactively change their strategy.
According to the government, the Autumn budget is intended to stabilise the UK’s fiscal environment, minimise borrowing, and improve the country’s welfare system.
“Today’s Budget builds on the choices that we have made since last July. To cut NHS waiting lists, to cut the cost of living, and to cut debt and borrowing… My choice is a Budget for fair taxes, strong public services, and a stable economy.” – Chancellor Rachel Reeves, Budget 2025 speech
To meet these goals, the Chancellor opted to increase tax revenue from somewhere, and revealed the source would be the wealthy, including asset-rich property owners.
This will bring additional changes and strain on the private rented sector, most of which is in London, where 17% of unincorporated landlords are based. Among the changes that London landlords, in particular, are struggling with are:
- Rising mortgage costs
- Mortgage interest restrictions (Section 24)
- Increasing insurance premiums
- Stringent tenant protection
- Stricter enforcement of rental laws
Add to this the Renters’ Rights Act 2025, which is already bringing mandatory compliance requirements, greater tenant rights, longer notice periods, and stricter penalties for non-compliance. It also brings higher costs to meet the new property standards, mandatory registration, and reporting obligations.
The high operational costs, additional administrative responsibilities, and new tax rates will reduce the profit margins of rental properties in London.
While it may seem bleak, there are ways to navigate these changes while still maintaining strong profitability.
Breakdown of the Autumn Budget 2025
Before we get into the strategies you can use to minimise the negative effects of the Autumn Budget 2025, let’s take a look at the specific changes that will directly affect London landlords and property owners.
2% increase in rental property income tax (from April 2027)
The new budget brings a 2% increase in all income tax rates on rental profits. The new rates are as follows:
- Basic rate: 22% (from 20%)
- Higher rate: 42% (from 40%)
- Additional rate: 47% (from 45%)
While the 2% may feel like a small amount, it can add up when you consider how much the average landlord earns from their rental properties.
The average rent for new UK lets in July 2025 is £1,301. This is £15,612 of rental income in a year. Instead of just paying £3,122.40, landlords will have to pay £3,434.64, which is £312.24 more.
If the landlord is renting a property tied to a mortgage, they can’t even deduct the mortgage interest completely because of Section 24. With London properties having higher mortgages, falling into higher tax bands, and facing higher maintenance and insurance fees, it could all add up for landlords and property owners.
Escalating changes for Mansion tax (from April 2028)
Did you know:
There are 145,000 homes in the UK valued at £2 million or more, with 68% of new sales happening in the Greater London area. – Standard.co.uk
The High-Value Council Tax Surcharge (HVCTS) or Mansion tax applies to properties with a value of £2 million or more. It cannot be passed on to tenants and must be paid only by the landlord. The Autumn Budget will introduce escalating annual charges, with the tax banding as follows:
- £2,500 annually for properties valued at £2.0m to £2.5m
- £3,500 annually for properties valued at £2.5m to £3.5m
- £5,000 annually for properties valued at £3.5m to £5.0m
- £7,500 annually for properties valued at £5.0m and more
While this applies across the UK, London will be hit the hardest, with the most significant number of properties valued at £2 million or more. Among the London boroughs are Kensington, Chelsea, Westminster, and Camden. Property owners will face higher costs to keep their high-value assets.
Freeze on personal income tax insurance thresholds (until April 3031)
The Autumn Budget will continue to keep personal income tax and National Insurance thresholds frozen until April 3031. This “stealth tax” will lead to several scenarios.
- Rising rents will push earned income into higher tax brackets
- Landlords will pay more tax even if there’s no real growth in rental income
- Inflation will diminish the value of tax-free allowances
When the new rental income tax rate hits in 2027, this will bring a bigger burden on landlords.
The good news…
Although it seems like one bad news after another, the Autumn Budget brings some good news.
For one, the Stamp Duty Land Tax will not change or increase. The same is true for the National Insurance Contributions (which were a huge concern before the Autumn Budget was finalised). The Capital Gains Tax will also not be aligned with the income tax.
All of these should help landlords plan their finances and rental strategies more clearly and confidently.
What Can London Landlords Do To Prepare Now?
At the moment, London landlords and property owners are facing a future of higher costs and reduced profitability. What can be done to survive these changes?
One thing working in the landlords’ favor is the local rental market’s resilience. London remains one of the strongest markets in the world. It will take some adjustments, strategic planning, and professional support, but landlords can still emerge with stable rental revenue and a more substantial property portfolio.
Apart from that, here are expert tips that London landlords can do right now.
Review ownership structure
Check if you can transfer your property ownership into a limited company structure. You’ll benefit from a lower tax rate (corporation tax is capped at 25%), fully deductible mortgage interest, and better net outcomes through dividends. Of course, this might trigger SDLT fees, a new mortgage application, and capital gains tax—but the reduced taxes may be worth it.
Optimise occupancy rates
If you have to pay higher taxes, work harder to reduce vacancies and maximise occupancy rates. The increase in rental income can offset the impact of new taxes. This is possible when you have a well-managed property that’s marketed on the right platforms.
Working with a property management company like City Relay can help through the following services:
- Multi-platform property listings
- Professional photography
- Local market insights
- Revenue management
- Dynamic pricing strategies
- 24/7 guest or tenant support
Improve the property value
A premium rental property attracts better tenants, encourages longer stays, has fewer issues and complaints, and justifies a higher rent.
Work on improving the property through refurbishments, upgraded features and amenities, regular inspections, and proactive maintenance.
Even small improvements could lead to a significant increase in rental income.
Stay compliant
List all the changes from both the Renters’ Rights Act and Autumn Budget that will impact your property. Assess your property to determine where you should start upgrading or improving to comply with the new rules. With all the additional taxes, you don’t want to pay for penalties and fines unnecessarily.
You should also monitor all certificates and licenses. Renew as needed to ensure everything is up to date.
Consider other letting strategies
The robust rental property market in London offers enough opportunities for various letting strategies. Landlords can switch to long-term, mid-term, and short-term letting depending on the current market demand.
Mid-term letting is a great way to avoid the 90-day limit on shortlets and minimise the impact of all the Renters’ Rights Act restrictions on longlets. You can also consider corporate letting or seasonal stays.
Property management experts at City Relay monitor market trends to guide landlords in London on what letting strategy to use to maximise rental income.
FAQs About the Autumn Budget 2025
How will the Autumn Budget 2025 affect London landlords’ income?
The Autumn Budget 2025 introduces a 2% increase in the rental income tax rate and a higher surcharge for properties valued at £2 million and more. Both will reduce net income for property owners in London.
Will the High-Value Council Tax Surcharge affect all properties in London?
London has the highest number of high-value properties, but only those valued at £2 million and more will be affected by the increase in HVCTS or mansion tax. Areas like Kensington, Camden, Chelsea, and Westminster will take most of the hit and face higher annual costs to keep their properties.
After the Autumn Budget, is it a good idea to incorporate my London rental property?
Incorporating your rental property is one way to minimise the effect of the Autumn Budget. Corporation taxes are capped at 25%, which is better than the higher rental income tax imposed on landlords. However, incorporating a rental property could trigger SDLT, CGT, and mortgage refinancing.
Calculate the costs and see what works best for your portfolio.
Can City Relay help landlords manage the rising taxes and compliance costs?
Yes, City Relay can help London landlords manage their properties to ensure competitive rental rates, full compliance, higher occupancy rates, and maximum rental income.
Our end-to-end property management service will ensure your property is well-maintained and compliant with local regulations, protecting your rental operations. Our property experts will guide you towards the right letting strategy to maximise rental yields despite rising tax rates and property fees.
Make Smart Adjustments to Protect Your Rental Property
The Autumn Budget 2025 will bring new challenges to London landlords, but it won’t completely compromise your rental business. Through proactive planning, you can thrive despite these changes, even with the compliance demands of the Renters’ Rights Act.
By understanding how the budget will impact your rental business, you can implement smart adjustments to optimise your property operations.
Partner with a property management company like City Relay to help you navigate the new tax landscape and rental property laws. Your goal is to stay compliant while maximising rental revenues through higher occupancy rates and premium rental properties.
Discover how our Lettings team can help you adjust to the changes in London’s rental market. Get a free rental estimate now.
