What Does the Autumn Budget Mean for Buy-to-Let?

The Autumn Budget has given UK landlords a clearer picture of the costs they face, and the tax news is likely to put pressure on some rental portfolios. That’s the news that from April 2027, the tax rates on property income will rise by a further two percentage points, on top of the increase announced last year.

For investors who own homes in their own names, that could cut into the profit they keep from rent.

The full effect will depend on each landlord’s finances, though. Some will be able to absorb the extra cost, while others may need to review rents, mortgage deals or plans to buy more property. The Budget certainly doesn’t spell the end of buy-to-let, but it gives investors good reason to check the numbers.

A further tax rise for landlords

From April 2027, the basic rate will be 24%, the higher rate 44% and the additional rate 49% for landlords in England, Wales and Northern Ireland. These rates reflect a total of four percentage points increase from the rates that applied before the changes announced in the last two Budgets.

The tax applies to rental profit, but the way HMRC calculates that profit can catch out landlords with mortgages. Individual landlords can’t deduct all their mortgage interest from rental income in the same way as other business costs. Instead, they receive a tax credit based on their finance costs, subject to the rules. This means a landlord’s effective tax burden can be higher than the headline rate suggests. A higher-rate taxpayer with a large mortgage may feel the increase more than an owner who has paid off most of the loan.

The impact will vary, so landlords should calculate their likely tax bill using their own figures. A portfolio that looks profitable before tax may leave less cash in hand once the new rates take effect.

Will more landlords sell up?

The tax rise may prompt some landlords to leave the sector, especially those who already face high mortgage costs or large repair bills, for whom this is merely the last straw. Others may sell one or two properties and keep the rest of their portfolio. There’s no single response that will suit every owner.

If more rental homes come onto the market, buyers could have a wider choice. Some properties may offer opportunities for investors who have the funds to buy without relying on a large mortgage, or who can secure finance on terms that support the expected rent.

So a wave of landlord sales isn’t guaranteed, and many owners have built up enough equity over years of ownership to still earn a sound return. Others may prefer to hold their properties for capital growth, even if the income they receive falls slightly.

Can landlords pass on the extra cost through rent?

Raising the rent may seem like the simplest way to offset higher tax. In practice, landlords need to judge what tenants can afford and what similar properties command in the local area.

A property in a high-demand location may give its owner more scope to raise rent. A home in an area with plenty of similar rentals may not. Push the rent too far and a landlord could face a longer void period, which can cost more than a modest increase would bring in.

Does buy-to-let still offer opportunities?

The latest Budget has made the cost of owning rental property less favourable for some individual landlords, yet buy-to-let remains an investment decision based on the purchase price, expected rent, finance costs, tax position and plans for the property.

A home bought at the right price, in an area with steady tenant demand, should still produce a useful return. Investors should calculate net yield and cash flow, then test how the figures look if mortgage costs rise, repairs prove more expensive, or the property stands empty for a month or two.

A good time to review a property portfolio

April 2027 is a clear deadline for landlords to work towards. Owners should review each property, estimate the tax due under the new rates and check when their mortgage deals end. They can then decide whether to keep, improve or sell each asset.

Buy-to-let now calls for even closer attention to the figures. Some landlords will choose to sell, while others will adapt and continue to invest. The best course will depend on the property, the owner’s tax position and the income it can deliver over time.

Auction House London provides in-depth guides for buying and selling property at auction, and if you have any questions about the properties and land currently available for auction, then contact our team of auction professionals. If you’re already looking to buy residential or commercial property at auction, browse through the lots listed in our forthcoming auction. Or, if you have property you want to sell, why not see how much it could be worth in an auction with a free valuation by Auction House London.