Today’s Autumn Budget brings another change for landlords and property investors, but as with any tax change, the important question is what it means in practice and how investors respond.
From 6 April 2027, the rates applying to property income are due to rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers in England, Wales and Northern Ireland.
This is a further increase on the 22%, 42% and 47% rates previously announced for April 2027.
For landlords holding property personally, that will inevitably mean another look at the numbers. But it doesn’t necessarily mean that property investment suddenly becomes unattractive.
A changing market can create opportunities
Some landlords may conclude that the increased tax burden, together with mortgage and running costs, means the time is right to sell. Others will continue to regard residential property as an attractive long-term investment.
For potential buyers, that may create opportunity.
If more established landlords review or rationalise their portfolios, good investment properties may come to market, including properties which already have tenants in occupation.
The key for investors will be doing the homework before committing to a purchase. That means considering not only price and rental yield, but funding arrangements, the proposed ownership structure and, where applicable, the existing tenancy.
Buying personally or through a limited company?
One question we expect investors to ask following the Budget is whether future properties should be purchased personally or through a limited company.
There isn’t a one-size-fits-all answer.
The tax position needs to be considered with an accountant or specialist tax adviser, but the decision also has practical conveyancing implications. Buying through a company can affect the mortgage arrangements, SDLT position and the legal structure of the transaction.
It is therefore far better to decide how the property is going to be owned before agreeing the purchase, rather than trying to change the structure halfway through the conveyancing.
Once appropriate tax advice has been obtained, we can work with the investor, their accountant and mortgage adviser to put the chosen structure into effect.
Existing landlords may want to review their portfolios
For existing landlords, the Budget may be an appropriate prompt to take stock.
That doesn’t necessarily mean selling. Depending on individual circumstances, landlords may be considering refinancing, acquiring additional properties, disposing of investments or restructuring how their portfolio is held.
Each brings different issues from a legal perspective.
For example, transferring an existing personally owned property into a company isn’t simply an administrative change. It is a transfer of legal ownership and may involve refinancing, SDLT and other tax considerations.
Similarly, selling a tenanted property requires some thought at the outset about whether it will be sold with the tenant in occupation or with vacant possession.
Getting the legal, financial and tax advisers involved at an early stage can make a significant difference.
Buying a property with a tenant already in occupation
This can be an attractive option for an investor, but there is more to consider than with a standard residential purchase.
The tenancy agreement, deposit arrangements and other documentation relating to the tenancy need to be considered carefully as part of the transaction.
Likewise, a landlord intending to sell with vacant possession needs to make sure that this can be achieved within the anticipated timescale rather than assuming that the property will simply be empty by completion.
These are issues worth identifying before too much time and money have been committed to the transaction.
Property investment after the Budget
The tax environment for landlords is undoubtedly changing, but property investment has always been about more than one tax rate.
Purchase price, rental return, borrowing costs, capital growth, ownership structure and the investor’s longer-term plans all form part of the picture.
For some investors the figures may no longer work. For others, a changing market may create opportunities to acquire, refinance or reshape a portfolio.
Our advice is simple: do the groundwork early.
If you’re considering purchasing or selling a buy-to-let, refinancing an investment property, buying through a limited company or restructuring an existing portfolio, our residential property team can help with the legal side of the transaction and work alongside your accountant, tax adviser and mortgage broker where necessary.
Speaking to us before you commit to the transaction means we can identify potential conveyancing issues early and help you structure the legal side correctly from the outset.
*This article is for general information only and should not be treated as legal, tax or financial advice relating to your individual circumstances.
Article by Chris Maddison, [email protected]
