Budget 2026: what the property tax changes mean for you

Budget 2026 increases the tax payable by individual landlords, changes the timing of capital allowances and confirms further measures affecting high-value homes, business rates and some minor tweaks to stamp duty land tax.

The changes do not all move in the same direction. Some businesses will benefit from earlier capital allowances or lower business rates, while property investors face higher income tax rates from April 2027. This Budget gives clients several reasons to review their plans before the new rules take effect.

The main property tax changes at a glance

Higher tax rates will change the economics for landlords

From 6 April 2027, the property basic rate will be 24%, the higher rate 44% and the additional rate 49% in England, Wales and Northern Ireland. This is a further two percentage point increase on top of the rise already  announced at Budget 2025.

My colleague, Steve York, considers this further in his blog ‘property income’.

Higher personal tax rates may make company ownership appear more attractive. Companies are normally able to deduct mortgage interest against their rental profits and are subject to a maximum rate of corporation tax of 25%. However, incorporation is not a simple solution. Moving an existing portfolio can trigger capital gains tax and stamp duty land tax liabilities where relief or special partnership rules are not available. Refinancing and novation of debt may also be required. For those wishing to take the majority of profits out of the company, such a structure may not be tax efficient.

Landlords should therefore compare the long-term position rather than focusing only on the headline rates. Borrowing, succession plans, income needs and the likely timing of a sale all need to be considered.

HM Revenue & Customs (HMRC) will also consult on expanding third-party reporting of property income data. Landlords should expect more comparison between their tax returns and information from other sources, making accurate reporting increasingly important.

Capital allowances give more relief upfront, but less later

For qualifying expenditure incurred on or after 1 January 2027, the main rate first-year allowance will increase from 40% to 50%. This change will benefit unincorporated businesses with qualifying capital expenditure above £1m or businesses that lease assets.

The main rate writing-down allowance will then fall from 14% to 12% from 1 April 2027 for corporation tax and 6 April 2027 for income tax. This will slow tax relief for unrelieved capital allowances pools going forward.

For example, a leasing business spending £500,000 on qualifying main pool plant could receive an initial deduction of £250,000. At the 25% corporation tax rate, this represents potential initial tax relief of £62,500. The remaining expenditure would normally enter the main pool and receive the lower 12% writing-down allowance in future years.

Timing will also matter. Businesses planning significant expenditure should review contracts, payment milestones and when the obligation to pay becomes unconditional.

The surcharge on high-value homes moves closer

The high value council tax surcharge will apply in England from April 2028 to residential properties worth at least £2 million. It will sit alongside council tax and will be payable by the owner rather than the occupier.

The annual charges range from £2,500 for properties valued between £2 million and £2.5 million and rise up to £7,500 for properties worth £5 million or more. Charges are expected to increase with inflation from 2029/30, with valuations reviewed every five years.

The detail will be particularly important for trusts, partnerships, companies and people who own valuable homes but have limited income. Owners near the £2 million threshold should consider the need for valuation evidence.

Companies within the annual tax on enveloped dwellings (ATED) regime (for residential dwellings over £500,000) face a separate increase in annual charges from 1 April 2027. Annual charges start from £4,750 per annual but with significant charges for more expensive residential properties.

Business rates support is welcome but targeted

From 1 April 2027, the threshold for 100% small business rate relief will rise from a rateable value of £12,000 to £18,000 for qualifying retail, hospitality and leisure properties in England. Tapered relief will extend from £15,000 to £21,000.

There will also be a two-year real-terms freeze for qualifying properties in 2027-28 and 2028-29. Pubs, social clubs and qualifying live music venues will receive total relief of 35%.

The measures should help smaller occupiers, but eligibility will depend on the property’s use, rateable value and occupation arrangements. Businesses should check that the correct relief has been applied rather than assume the position is automatic.

SDLT changes are narrower than some expected

There were no broad stamp duty land tax rate changes for ordinary property purchases. Instead, the Budget only made a few targeted technical changes.

The group relief rules will be amended so that winding up the vendor does not prevent relief from being clawed back within the usual three-year period if the purchaser later leaves the group. The Budget also announced some changes to local government pension scheme transfers. From 1 May 2026 SDLT is no longer charged on the rent element of assured tenancies, and an SDLT return is not required solely because rent is payable under such a tenancy.

Review plans before the changes take effect

The common theme is timing. Landlords may wish to model the effect of higher property income tax rates from April 2027. Businesses planning capital expenditure should review project costs and contract dates to understand when tax relief will be achieved. Owners of high-value homes have longer, but valuations and complex ownership arrangements may take time to resolve.

Property taxes should be considered together. A restructuring that reduces income tax may create stamp duty land tax or capital gains tax liabilities.

If you own, invest in, develop or occupy property, PKF Francis Clark’s property tax team can help you assess the changes, model their financial impact and identify any action required before the relevant commencement date.