Chancellor John Healey Increases Tax on Rental Income and Savings

Chancellor John Healey announced in the Autumn Budget on October 28 that the United Kingdom government will increase income tax on rental earnings and savings by 2% starting April 2027. This measure follows a previous 2% increase announced by Rachel Reeves, resulting in a total rise of four percentage points. The changes bring the basic rate of tax on rental income to 24%, the higher rate to 44%, and the additional rate to 49%.

HM Treasury stated the policy aims to secure additional contributions from individuals with taxable income from assets while leaving employment earnings tax rates unchanged. The government claims that 84% of taxpayers will remain unaffected by the move.

Industry bodies, including the National Residential Landlords Association and Propertymark, described the tax rise as punitive. These organizations warned that the increase will reduce rental supply and drive up costs for tenants. Analysts suggest that the combined pressure of this tax burden and the Renters’ Rights Act may force unincorporated landlords to exit the market or transition their properties into limited company structures to mitigate costs.