The Autumn Budget has reshaped the operating landscape for landlords, developers and investors. Investec brought together industry experts to understand what the changes mean for the sector. Here are seven key insights from the discussion.
A summary of the Autumn Budget changes for the property sector
- A separate rate of income tax will apply to property income from April 2027: 22% (basic rate), 42% (higher rate) and 47% (additional rate).
- Dividend tax will rise by 2% from April 2026 to 10.75% (basic rate) and 35.75% (higher rate).
- The freeze on personal tax bands has been extended until 2031.
- From April 2028, owners of homes in England and Wales valued at more than £2 million will pay a council tax surcharge directly to central government. The charge starts at £2,500, rising to £7,500 for homes valued over £5 million.
- Business rates will increase for properties with a rateable value above £500,000 from April 2026.
- Increases to the national minimum wage and national living wage (from April 2026) could push up construction costs.
1. The Budget could increase costs for landlords and property entrepreneurs
The combination of frozen tax bands and higher rates on dividend and property income means landlords must think carefully about how they manage their personal and business finances.
Marc Wright, Senior Investment Director at Rathbones, noted that inflationary pressures could push more earners into higher tax brackets. “With inflation running at around 3.5 – 4.5% over the next five or six years, someone who is paying themselves £100,000 now will have to pay themselves £120,000–£125,000 by 2031 to have the same purchasing power. This almost takes people into the 45% tax bracket.” He added that rising dividend tax will also make it more expensive to extract profits: “With basic and higher dividend tax rates going up 2%, it’s also more expensive to take profits out of a company. The question will be, how can individuals draw an income as efficiently as possible?”
2. The ‘mansion tax’ could rise
Another high-profile measure was the introduction of an annual ‘mansion tax’ on homes valued over £2 million in England and Wales. Knight Frank estimates that the number of properties in this bracket will rise from 150,000 to around 190,000 by 2028.
While the initial levy is relatively modest, our panellists suggested it may increase over time. As Marc Wright said, “While the levy starts low, I think we could see more increases in wealth tax from this government, or a future administration, as spending pressures grow.”
3. There could be some relief in the residential market
The market reacted positively to the absence of additional measures such as capital gains tax rises or stamp duty reform. Tom Bill, Head of Residential Research at Knight Frank, noted: “There is some short-term optimism around what the Budget didn’t do compared to all the speculation around what it could have done. In our view, a transaction-based tax could have had unintended consequences, so it’s good the Government steered away from that.”
However, he warned that political instability remains: “We’re in an uncertain period at the moment. I think there’s going to be a slightly more problematic period for the market into the spring.”
Even with the lead up to the Budget and all the anxiety around it, I didn’t see many businesses push the pause button. Businesses seem to be cracking on at the moment, but let’s see how the next few months fare when the dust settles and the realisation comes of what people are paying in terms of their tax and their business rates.
4. The Budget could push up rents
Knight Frank expects rental growth of around 4–5% in markets such as prime central London and the Home Counties in 2026, and higher operating costs for landlords may place further upward pressure on rents.
But affordability constraints are already evident. Michael Henretty, Partner at Carter Jonas, observed: “Rents are already squeezed, especially at the lower end of the market. If you look at a House of Multiple Occupation (HMO) in London’s zone six, for example, people are paying £1,000 a month in rent. At some point, tenants are going to say, ‘we can’t afford this.’”
If you looked at a room in somewhere like Clapham, five years ago, it would have been £750 or £800 to rent. The exact same room now would be £1,250, but a graduate coming to London is still getting paid exactly the same as they were when they arrived. If they’re working from home, not going to the office, maybe they think, ‘I should go to Manchester or Birmingham’. They're spending a lot of money at that level of their career. It's a real consideration.
5. Rental stock could decrease
Higher taxes could accelerate the withdrawal of landlords from the market, further reducing rental supply. Tom Bill noted: “If you look at rental listing volumes in London, for example, they are down by about 10% below the five-year average. Some stock has come out of the market.”
A property entrepreneur echoed this sentiment, describing widespread fatigue among small developers: “In the last 18 months, almost every developer I’ve worked with has said, ‘I’m not doing this anymore’. Planning was a nightmare, builders walked off site, they couldn’t get materials. Then when they get to the end of it, because of the way the market is, they’re struggling to sell. They’re going, ‘I never wanted to be a buy-to-let landlord, I’m not doing another one’.”
In the last 18 months, almost every developer I’ve worked with has said, ‘I’m not doing this anymore’. Planning has been a nightmare, builders have walked off site, and they couldn’t get materials. Then, because of the way the market has been, they’ve struggled to sell. They’re saying, ‘I never wanted to be a buy-to-let landlord, I’m not doing another one’.
6. Property will have a role in the ‘greatest wealth transfer in history’
An estimated £7trn is expected to pass between generations in the UK over the next 30 years, with property forming a substantial share of inherited wealth. In the current environment, many beneficiaries may rethink how they use or hold those assets.
Cheryl MacDonald, Financial Planning Director at Rathbones, explained: “Many people don’t want to move into a property they inherit from their parents, so they will look for other ways to turn that asset into future income. For example, if someone is an additional-rate taxpayer now, they may be able to use certain investment structures that allow growth without immediate dividend or capital gains tax. Then, when they reach retirement and need to draw an income, they can do so in a more tax-efficient way.”
She added that property developers and property owners are also reviewing how they diversify risk: “We're also finding that property developers and those with property companies and businesses are looking to expand their concentration risk.”
7. It may be time to re-evaluate your finances
In this shifting landscape, thoughtful banking and financial planning becomes increasingly important. Marc Wright noted: “We can consider how to appropriately extract cash from assets, bring spouses and other family members into our planning structures, and explore what is possible offshore.”
Tailored lending can also support long-term investment strategies. As Investec Private Banker Daniel Swift explained, “When yields are challenged, it’s important to work with a lender who can take a wide-ranging view of your finances to determine affordability. At Investec, we can create flexible forms of lending, such as revolving credit facilities, to support cashflow. And we can refinance developments that remain unsold.”
Want to discuss the financial options with our specialists? Please get in touch today.
Important information:
This article is for general information purposes only. The opinions featured are not to be considered as the opinions of Investec Bank plc and do not constitute financial or other advice. It is advisable to contact a professional adviser if you need financial advice. Your use of and reliance on any of this content is entirely at your own risk.
Browse articles in