Budget 2025 - A Summary of Property Related Changes
Another Budget has landed. Part policy update, part plot twist. From tax tweaks to sector shake-ups, it’s the annual moment when landlords, businesses and households lean in, hold their breath, and wonder: “Is this the year the Chancellor gives us a break… or another surprise we didn’t ask for? Here is a summary of the property/company related bits
Below is a summary of the budget changes relating to property in detail.
It was put together by Cath Walker of Walker Accountancy Limited in Derby:
Income tax rates
There will be an extra 2 percentage points added to property (and savings) income tax rates from 6 April 2027, meaning that this income will be taxed at 22%, 42% or 47% depending which tax band it falls within.
The deduction for residential property interest relief will also increase to 22%.
HMRC stipulates the order in which income falls to be taxed, and the order will be: earned income (employment and self-employment) and pension income, and then savings and property income, followed by dividend income.
This means that, if you have earned income of more than your personal allowance, you will have to use your personal allowance against that income. You can’t choose to use it against your property income just because it is taxed at a higher rate.
If your personal allowance is not fully used against your earned income, you will be able to use any balance against your property income.
High Value Council Tax Surcharge
The government is introducing a High Value Council Tax Surcharge (HVCTS) in England for residential properties worth £2 million or more in 2026, taking effect from April 2028.
The charges start at £2,500 per year, rising to £7,500 per year for properties valued above £5 million, and will be levied on property owners rather than occupiers.
The Valuation Office will conduct a targeted valuation exercise to identify properties above £2 million and therefore in scope.
Properties above the £2 million threshold will be placed into bands based on their property value. Charges will increase in line with CPI inflation each year from 2029-30 onwards:
Threshold (£m) Rate (£)
£2.0-2.5 £2,500
£2.5-3.5 £3,500
£3.5-5.0 £5,000
£5+ £7,500
The funds raised will go to central government.
There will be a public consultation on the details in early 2026.
Making Tax Digital (MTD) penalties
There will be no penalties for late quarterly reports under MTD for ITSA in 2026-27.
Penalties will apply for late filing of the final submission.
Collection of tax liabilities in-year
We all saw it coming with MTD! HMRC will start to collect more tax payments in year from April 2029.
For those having employment income taxed under PAYE, tax codes will be changed to collect tax via the PAYE system.
For those with just self-assessment income (and presumably those with insufficient PAYE income), there will be “timelier tax payment “.
A consultation on delivering the change will be launched in early 2026.
For those with limited companies:
Dividend tax rates
The tax rate on dividends will increase by 2 percentage points from 6 April 2026. This means that dividends in the basic rate will be taxed at 10.75% and higher rate will be 35.75%. There is no change to the additional rate, which remains at 39.35%.
Reporting dividends from personal companies
The government will publish a consultation in early 2026 to explore introducing new requirements to report transactions between close companies and their shareholders to HMRC.
Most owner-managed companies will be close companies – in simple terms, companies with fewer than 5 shareholders, or where all of the shareholders are directors.
This proposal would see them having to report dividend paid to their shareholders throughout the year – presumably to aid in the in-year collection of tax proposed above.
Many thanks once again to Cath Walker for allowing me to use her excellent summary.
