Landlords scrutinising the second budget from Chancellor Rachel Reeves since Labour came to power may be relieved that some of the previously rumoured proposals affecting the rental market didn’t become reality. One of their biggest concerns, for example, had been the introduction of National Insurance on rental income.
While that didn’t materialise, other measures which could hit both landlords and their tenants hard, were.
Confirmation of the mansion tax
One of the key announcements of the budget was the introduction of a mansion charge, a supplementary levy in addition to council tax that will be imposed on properties worth more than £2 million. Reeves stressed that this charge, which will be in place from April 2028 following property revaluations next year, will apply to only 1% of properties. Most of these will be based in the higher-value markets of London and the southeast.
Changes to taxation
For landlords in Peterborough, concerns are more likely to focus on the other measures announced in the budget. Separate tax rates for property income will be introduced from 6 April 2027 at 22% for the property basic rate, 42% for the property higher rate and 47% for property additional rate. Tax rates on dividend income will also increase, up by 2 percentage points at the ordinary and upper rate from 6 April 2026. This will increase costs for landlords, particularly for those with larger portfolios.
There are also changes to salary-sacrifice pensions and to the writing-down allowance, which will impact corporate landlords and their tax planning strategies.
Challenges will also come from the extension of a freeze of income tax thresholds by a further three years until 2031. The extension is a year longer than rumoured before the budget and follows a six-year freeze put in place by Rishi Sunak. Although the thresholds themselves haven’t changed it means that as landlords incomes rise, more will be pulled into higher income tax brackets. Tenants also face the same threat of fiscal drag as their own wages increase, and they move tax brackets which could impact affordability.
Impact on rents
Tenant affordability at the lower end of the market should improve. The day before the budget, the government confirmed a 4.1% increase in the National Living Wage for workers aged 21 and above. The minimum wage will also increase for younger workers from April.
Meanwhile, the scrapping of the two-child benefit cap will also improve affordability for those on benefits such as universal credit or tax credits who previously couldn’t claim for more than two children.
Other measures, such as a rail fare freeze, bus fare caps and fuel duty cuts, will also cut costs for those commuting to work and come alongside energy price cuts too. However, such savings may soon be swallowed up for tenants. In its response to the budget, the National Residential Landlords Association (NRLA) said the wider impact would be negative, with the increase in taxation on property income forcing a subsequent rise in rents, meaning that tenants will end up paying more.
Careful management required
Careful management of portfolios will be required in 2026, especially with landlords also required to begin implementing the Renters’ Rights Act from May 1. HMO landlords in Peterborough will also be subject to the launch of Additional Licensing for HMO properties of three or four people from next year.
At Progressive Lets we are experts in the rental market in the Peterborough area and help landlords find and manage properties within a 50-mile radius. Get in touch to find out more.
