Is it still worth being a landlord after the Budget?

Landlords have been given fresh reasons to consider exiting the buy-to-let sector after a new round of tax increases were unveiled in the Autumn Budget.

Chancellor John Healey used his debut fiscal update to reveal that a planned income tax rise on rental income next year will be higher than expected.

It is the latest blow for landlords who have been dealing with the first months of new rules and regulations under the Renters’ Rights Act.

On top of this, landlords have been hit in recent years with restrictions on mortgage interest relief, extra stamp duty charges and the responsibility for ensuring the homes they rent out meet minimum energy efficiency standards.

Chris Norris, chief policy officer for the National Residential Landlords Association (NRLA), told MoneyWeek: “Landlords were already questioning whether they could afford to remain in the sector. This further tax rise risks pushing even more landlords towards the exit, deepening the gap between supply and demand and driving rents up.”

What did the Autumn Budget announce for landlords?

Previous chancellor Rachel Reeves had already unveiled plans in the 2025 Budget to raise income tax on rental income, as well as on savings interest, by two percentage points from April 2027 to 22%, 42% and 47% depending on the individual’s tax band.

While landlords were preparing for this, Healey announced a further two percentage point hike in the 2026 Budget.

This means that from April 2027, landlords will pay 24% for the basic rate, 44% for the higher rate and 49% for those who are additional rate taxpayers.

How will higher property taxes affect landlord returns?

Property services provider Connells Group has crunched the numbers on the tax impact for landlords, including mortgage interest relief and allowing for other expenses.

The average annual rental income received by landlords, according to the estate agency brand, is £16,478. It also assumes expenses of £5,108 per year.

Assuming a mortgage rate of 5.25% and a typical mortgage payment of £7,875 per year, Connells Group estimates that landlords would have an annual profit of £3,495.

Currently, a basic rate taxpayer would owe £699 in tax on that, but that will rise to £839 from April 2027.

Higher rate taxpayers will pay £3,113 in tax, up from £2,973. This also includes mortgage interest relief, which is a 20% tax credit, based on mortgage interest payments.

This will leave a landlord on the basic rate with £2,656 of annual profit from the £3,495 instead of £2,796. A higher rate taxpayer would be left with £382 instead of £522 over the year.

That £140 difference may not look like a lot on paper, but Connells Group research director Aneisha Beveridge says it is the impact on sentiment that is important.

She says: “On its own, this is unlikely to fundamentally change the investment case, but it comes on top of higher borrowing, maintenance and regulatory costs alongside broader tax changes that have already squeezed returns.

“The increase also widens the divide between landlords who own personally and those operating through limited companies, whose rental profits are subject to corporation tax rather than these higher personal tax rates.”

Source: Connells Group

Not all landlords will have mortgages though.

Separate analysis for MoneyWeek by estate agency brand Boydens looked at a mortgage-free property renting for £1,200 a month (equivalent to £14,400 a year), with £2,400 a year in allowable running expenses. That leaves £12,000 in taxable rental profit.

Currently, a landlord on the basic rate would pay £2,400 in tax on this income and retain £9,600 per year. The amount retained drops to £9,120 under the new rates from April 2027 as the amount of tax paid will rise to £2,880.

A higher rate taxpayer would pay £4,800 tax on the rental income, holding on to £7,200 of the annual profit currently. But that will fall to £6,720 in 2027/28 after a tax bill of £5,280.

In either example, the latest Budget adds £480 a year of tax compared with current rates.

For the higher-rate landlord, that is a reduction in profit of around 6.7%, even with rent and running costs unchanged.

Is buy-to-let still worth it?

Many will see Healey’s Budget as a “vindictive raid on landlords”, says Norris, from the (NRLA).

He adds: “This lands on top of pressures that are already mounting. The Renters’ Rights Act has brought a range of new costs, including a new annual registration fee for every property, and expected Ombudsman membership.

“Separately, the removal of tax relief for legitimate business costs has driven viability down and rents up. If that were not enough, borrowing costs have added around £1,100 a year to a typical new buy-to-let mortgage and mandated energy efficiency upgrades will cost many up to £10,000 per property.”

Landlords have also been battling with lower rental demand and tepid rental growth.

Average UK rents increased by 3.8%, to £1,406 in the 12 months to September 2026, according to the latest Office for National Statistics data – unchanged from August.

Philip Boyden, managing director of Boydens Estate Agents, suggests landlords will be looking more closely at the figures and exploring the alternatives.

He says: “Another tax increase becomes part of that calculation. It may affect what someone is prepared to pay, which properties they consider or whether they expand their portfolio. It does not automatically mean they will decide against investing, but the property has to justify the commitment.”

Some landlords may consider selling.

Research by Property118, a website for landlords, found that two thirds of landlords intend to sell properties or exit the rental market over the next three years.

But this isn’t necessarily “a simple response,” warns Beveridge, from Connells Group.

The Renters’ Rights’ Act has introduced longer notice periods of four months and restrictions on re-letting if a sale falls through, which could make some landlords more hesitant to start the process, even if their returns come under pressure.

There will also be capital gains tax to pay on any profits from the sale, plus there is no guarantee you will get the price you want in the current buyers’ market.

Instead, Beveridge says many landlords have already opted for moving their portfolio into company ownership where you pay corporation tax rather than income tax.

She warns: “The upfront tax costs of transferring existing properties mean it is not a straightforward solution for everyone.”

Ultimately, Nouran Moustafa, practice principal at Roxton Wealth, some landlords will absorb the costs, some will reconsider expansion and others may sell.

She adds: “The irony is that making private renting less attractive to investors doesn’t automatically make renting more affordable for tenants.Property can still be a worthwhile investment, but the days of assuming any buy-to-let will generate attractive returns are long gone.”