Income tax on property income to rise by 2 percentage points
26 Nov 2025
2 min read
/Passle/5d9604688cb6230bac62c2d0/SearchServiceImages/2025-11-26-16-06-26-124-692725822b2ecba665ac1276.jpg)
At today's budget, the Chancellor announced an increase to the rates of income tax on property income.
Supporting documents released alongside the budget indicate this will be achieved through the creation of separate tax rates for property income, as is already the case for dividend and savings income (which, incidentally, are also increasing).
When the changes are introduced in April 2027, the income tax rates on property income will each be 2% percentage points higher than the rates of income tax applicable to employment, trading or pensions income. The rates applicable to property income will be 22% (basic rate), 42% (higher rate) and 47% (additional rate).
Additionally, the income tax ordering rules will also be changed so that the income tax personal allowance will be deducted against employment, trading or pension income first, meaning a basic rate taxpayer with a combination of employment income and property income will see their personal allowance first cancel out their employment income (chargeable at 20%) rather than their property income (chargeable at 22%).
This is part of the government's stated desire to reduce what they see as a gap between taxation of income arising from assets compared to income arising from employment or trading. It's possible that it will accelerate the recent trend for investors to use corporate vehicles to hold their property investments.
The government is raising rates of tax on property, savings and dividend income to ensure income from assets is taxed more fairly. Those with property, savings or dividend income pay less tax than those whose income comes from employment or self-employment as they do not pay National Insurance. The government is increasing taxes on property, savings and dividend income to help to narrow this gap between tax paid on work and tax paid on income from assets.