Another New Tax For Landlords?

The last news landlords need to hear right now is that more taxes could be on their way. There is no official confirmation at this point, but The Times has reported that a government leak has indicated that there are plans to introduce National Insurance on profits from rental income.

This could be announced in the Autumn 2025 Budget, as the Treasury looks at ways to raise funds in an attempt to decrease a £40 billion hole in the public finances. Rental income is currently exempt from NI contributions, but landlords pay income tax on rental income.

While we will have to wait to find out whether this is mere speculation or will soon become a reality, initial worries are that landlords may have to pay the 8% NI contribution that is currently applied to employee income.

How tax changes have affected landlords over the last decade

Over recent years, landlords have already faced multiple tax changes and other compliance requirements impacting profits. From the changes to mortgage interest relief to stamp duty surcharges and capital gains tax allowance reductions, landlords have had to navigate significant tax changes:

Mortgage interest relief – Starting in 2017, the previous 100% mortgage interest deduction that landlords could take into tax calculations was phased out over three years and since 2020, landlords can only claim a 20% basic rate tax relief.

Stamp duty land tax – A stamp duty surcharge of 3% was introduced in 2016 on second home purchases, which was then increased to 5% in the Autumn 2024 Budget. Further stamp duty changes were wielded, with stamp duty thresholds being reduced, meaning more stamp duty for landlords purchasing properties, in addition to the surcharge.

Capital gains tax – The personal allowance amount for CGT has also dropped considerably. In 2022 it was £12,300, dropping to £6,000 in 2023 and then £3,000 from 2024. This means that landlords selling second properties now pay more tax on their property value gains.

Corporation tax – For landlords who set up as limited companies to continue claiming mortgage interest relief, the corporation tax increased from 19% to 25% in 2023.

Is the private rented sector still profitable?

With added tax burdens to contend with, along with legislative changes, some landlords have decided to sell their rental properties. However, there has been some good news for landlords, with mortgage interest rates gradually dropping over the last 12 months.

The Bank of England base rate was 5.25% in 2023 going into 2024 but has steadily decreased and in August 2025 the base rate was down to 4%. Further interest rate drops are expected, so landlords taking out new mortgages or renewing mortgage deals are in a better position in terms of interest rates than 12-24 months earlier.

Rents inflation may have slowed down in some areas of the UK, but steady rents inflation is still helping landlords to stay profitable. In the South West, the average rents inflation was 4.5% over the year leading up to July 2025.

While tax changes have made it more difficult to generate the levels of profits experienced a decade ago for some landlords, investing in property is still considered to be one of the best low-risk investments, due largely to the likelihood of property values going up. When selling a second property, the initial stamp duty paid is deducted from the capital gains tax, along with any other legal and agent fees.

Conclusion

Buying a property in an area where there is high rental demand can still generate good rental income, landlords may just need to be more strategic with the types of properties they invest in and the location. You can read our blog on Buying to Let in Bridgwater for some insights into the key factors to consider when investing in property and why Bridgwater could offer a great investment opportunity.

Additionally, if you are worried about the upcoming regulation changes included in the Renters’ Rights Bill, using an experienced lettings agent can support you with all the compliance related work involved in managing properties.

Contact us today to find out how we can help.