The Autumn Budget 2024 (delivered 30 Oct 2024 by Chancellor Rachel Reeves) introduced a range of tax measures affecting property owners. While many changes target non-resident investors and high-earners, UK landlords will see important implications in several areas from 2025 onward.
In particular, alterations in mortgage interest relief, capital gains tax (CGT) on property disposals, inheritance tax (IHT) allowances and stamp duty land tax (SDLT) surcharges will impact landlords’ costs and planning. Below we break down the key reforms, explain their effects (including any transitional provisions), and advise on next steps.
Mortgage Interest Relief and Finance Costs
From April 2020 the phased restriction on finance-cost relief for residential landlords was fully implemented – landlords now get only a basic-rate (20%) tax credit on mortgage interest. The Budget did not reverse this regime. In fact, it extends the same restriction to Furnished Holiday Lets (FHLs) from 6 April 2025: FHL landlords will lose their special tax status and will only receive basic-rate tax relief on interest.
Key points:
- Existing regime unchanged for standard buy-to-let – finance costs remain deductible only via the 20% credit.
- FHLs treated as ordinary rental businesses from 2025 – tax advantages end, including capital allowances and special treatment of finance costs.
Example : A landlord with an FHL currently benefiting from interest relief at their marginal rate will, from April 2025, receive only a 20% tax credit on those interest payments
Capital Gains Tax on Property Sales
The Autumn Budget raised the main CGT rates on disposals, but key rates for residential property remain unchanged. From 31 October 2024 the CGT rates on general assets rose to 18%/24%, aligning them with the existing rates on residential property.
Transitional Rules: Contracts exchanged before 30 October 2024 may still qualify for the old CGT rates, subject to certain conditions.
Inheritance Tax (IHT) and Property
The Budget extended the freeze on IHT allowances and signalled major future reforms affecting long-term residents:
- IHT thresholds remain frozen until 2030: The £325,000 nil-rate band and £175,000 residence nil-rate band (RNRB) are fixed at current levels through 2030.
- Residence-based IHT for non-doms: From 6 April 2025, long-term UK residents become liable to IHT on worldwide assets.
Implication: UK landlords should review estate plans in light of the frozen thresholds and, if non-UK domiciled, the coming residence-based IHT regime. In all cases, maximising use of the nil-rate and residence bands (through gifting, trusts, or spousal exemptions) will be crucial under the extended freeze.
Stamp Duty Land Tax (SDLT) Updates
Significant SDLT surcharges took effect from 31 October 2024, raising costs on purchases of additional homes:
- Higher SDLT surcharge for landlords/second homes: The 3% higher-rate SDLT surcharge on additional residential properties was increased to 5% from 31 Oct 2024
- Flat rate on high-value corporate deals: The 15% flat SDLT rate for corporate/non-natural-body purchasers of residential property over £500k has gone up to 17%
Transitional rules: Contracts exchanged before 31 October 2024 can still attract the old rates, provided they are not later varied or assigned.
Making Tax Digital (MTD) for Income Tax
Another important development landlords must prepare for in 2025 is the expansion of Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). MTD for ITSA, previously delayed several times, will become mandatory from April 2026 for individuals with gross income over £50,000 from self-employment and/or property. However, April 2025 marks the beginning of voluntary sign-up and testing.
Key Features:
- Quarterly reporting: Landlords will need to keep digital records and submit quarterly updates to HMRC through compatible software.
- End-of-period statement (EOPS): After the tax year ends, landlords will be required to submit a final declaration (EOPS), confirming their income and claiming any relevant reliefs or adjustments.
- Software requirement: Spreadsheets alone will not suffice; records must be kept using HMRC-approved software or through a digital link to compliant platforms.
Who Must Comply?
- From April 2026: Landlords and self-employed individuals with gross income over £50,000.
- From April 2027: Threshold lowers to £30,000.
- From April 2028: Threshold lowers further to £20,000
- Joint property owners must report their share of rental income individually under MTD rules.
Conclusion: MTD represents a significant administrative shift. While it won’t be legally required for most landlords until 2026, early action in 2025 will reduce compliance risks and ensure accuracy in quarterly updates.
Next Steps for Landlords
As 2025 brings significant tax and regulatory changes, UK landlords face a critical period of adjustment. From increased Stamp Duty surcharges and the removal of favourable tax treatment for furnished holiday lets, to the continued freeze on Inheritance Tax allowances and the phased introduction of Making Tax Digital, the financial and administrative landscape is shifting. Landlords must act proactively—reviewing financing arrangements, re-evaluating property holding structures, and preparing for new digital reporting requirements.
Seeking professional tax advice and planning strategically will be essential to mitigate the impact of these reforms and ensure long-term resilience in a more complex and regulated property market.
