Although not quite as swinging as hinted at prior to the Autumn Budget, here are the key announcements which affect UK property:
Increase On Income Tax Payable on Rental Income
- From April 2027 a 2% increase in the rate of income tax that will apply to rental income from letting an investment property.
- The measure will increase the income tax liability on rental profits for those landlords who have rental portfolios held in their own names. While not explicitly stated, it is expected that this will also affect the income tax rates of trusts receiving rental income.
- Finance cost relief will be increased to 22%.
- Landlords who hold property in a company will be subject to the 2% increase in the dividend tax rates (for basic and higher rate bands), which is due to be introduced from April 2026.
Mansion Tax
- From April 2028, a new Annual High Value Council Tax Surcharge will apply to residential properties in England. This surcharge will be payable by the property owners rather than the occupiers, who will continue to pay the existing council tax rate.
- All owners of residential property valued at more than £2 million in England will pay the surcharge. However, there will be an exemption for social housing.
- The surcharge will be payable from April 2028 and will be based on valuations undertaken in 2026. It is intended that subsequent revaluations will take place every five years.
- The charges will increase in line with CPI inflation each year from 2029-30 onwards. Although the tax will be collected by local authorities, this will be a national tax.
- The government will consult on a full set of reliefs and exemptions, including rules for complex ownership structures such as companies, funds, trusts and partnerships. It will also introduce a deferral system for those who are “asset rich but cash poor.” Full details of the consultation will be issued in the new year.
Capital Gains Tax
There were no changes to the Annual Exempt Allowance or CGT rates.
Agricultural Property Relief/Business Property Relief
The combined allowance for the 100% rate of relief for APR and BPR will be fixed at £1m until 5 April 2031. Any unused relief can be transferred between spouses and civil partners including if the first death was before April 2026.
Inheritance Tax
The Residence Nil Rate Band will be frozen until 5 April 2031.