Lizaveta Herman
The Chancellor stands up on Wednesday 28 October, and most of the noise will be about capital gains tax. For a typical mortgaged landlord, though, the Budget is not the biggest threat to net yield. The Bank of England is.
Key takeaways
- The April 2027 tax rise on rental income is already law. On our example deal it costs £118 a year.
- A one-point rise in your remortgage rate costs the same deal £1,053 a year.
- The real Budget risk is for sellers, if CGT rises to income-tax levels a £60k gain could cost £8,300 more.
What's already law
These changes happen whatever the Chancellor announces.
| Change | From | What it means |
|---|---|---|
| Property income tax | 6 Apr 2027 | 22% / 42% / 47%, and the finance-cost credit rises to 22% |
| Landlord register | 15 Dec 2026 | £65 per property per year, deadlines by region |
| Making Tax Digital | 6 Apr 2027 | Quarterly updates if gross rent is over £30,000 |
| Dividend tax | Apr 2026 | 10.75% / 35.75%, which hits company owners drawing profit |
| Stamp duty surcharge | No change | Stays at 5%, ruled out for this Budget |
What to watch on 28 October
| Rumour | Status | Who it hits |
|---|---|---|
| CGT aligned with income tax | Widely predicted | Anyone selling in the next few years |
| £2m council tax surcharge cut to £1.5m | Under discussion | Mostly prime London |
| National Insurance on rent | Rumour only | All individual landlords |
| Rent controls | Ruled out for now | — |
The numbers: one Yorkshire deal
Yorkshire & Humber has the highest average yield in England and Wales, at 9.3% (Fleet Mortgages, Q3 2026). Our example is a £180,000 terrace let at £1,395 a month, with a 75% interest-only mortgage at 5.5%. Running costs are 20% of rent, and the owner is a higher-rate taxpayer. That leaves £5,902 of cash profit a year before tax.
| Scenario | Tax | Net profit |
|---|---|---|
| Today | £3,846 | £2,056 |
| From April 2027 | £3,964 | £1,938 |
| April 2027 + remortgage at 6.5% | £3,667 | £885 |
£118a year: the cost of the April 2027 tax rise
£1,053a year: the cost of a one-point rate rise on remortgge
The tax hit is small because the finance-cost credit rises by the same two points as the tax rate. Rates are a different story. Average five-year fixes reached 6% in early October, and markets expect the Bank of England to raise rates on 5 November.
Note the effective tax rate: £3,964 on £5,902 of cash profit is about 67%. That is why incorporation keeps coming up. It is not automatic because moving property into a company triggers stamp duty and CGT.
If CGT goes up
Your pre-Budget checklist
Say you bought the same house in 2016 for £120,000. After costs and the £3,000 allowance, the taxable gain is £52,000. At today's 24% that is £12,480. At a 40% income-tax rate it would be £20,800.
Don't rush a sale to beat the Budget. You would need to exchange contracts within days, and any change could apply from the day it is announced.
- Stress-test at 6.5–7%
- Find your register deadline and budget £65 per property
- Model any planned sale under both CGT scenarios
- Get MTD-ready if your gross rent is over £30,000
- Judge deals on net yield, after tax and finance costs not gross
Run these numbers on any Rightmove listing: net yield, stressed cash flow and tax drag in one place.
Analyse a listingGeneral information, not tax or financial advice. Figures use rates in force or legislated as of 16. 10. 2026. We will update this article on Budget day.