Budget raises tax on rental income by two more points and sets Your First Home details

Chancellor John Healey used his first Autumn Budget to raise income tax on rental income by a further two percentage points. Landlords will pay 24%, 44% or 49%, depending on their tax band, from April 2027. The source says previous Chancellor Rachel Reeves had already announced a two-point rise from that date. The Budget contained no Stamp Duty cuts or reforms.

Heather Powell, a partner at accountants Blick Rothenberg, said landlords would look to sell and invest elsewhere, leaving tenants with reduced supply and higher rents. Paul Hardy of LSL said the Stamp Duty surcharge on second homes rises from 3% to 5% with immediate effect, which he described as a sudden financial impact on investor landlords planning to expand their portfolios.

The Your First Home scheme will launch in Spring 2027. It supports a 2.5% deposit through a government equity loan for buyers of new-build homes, with £4.7bn of Treasury funding. Income caps are £110,000 per household outside London and £140,000 inside London. Price caps will be based on local authority median prices, with caps of £650,000 in inner London and £500,000 in outer London.

Richard Donnell, executive director of Zoopla, said: "The Budget has delivered a welcome boost for first-time buyers and the home-building industry." Zoopla estimates that, if local price caps are set at what first-time buyers want to pay for new homes, over a third of new homes would be eligible and up to 30,000 first-time buyers a year could benefit.

The Government confirmed the High Value Council Tax Surcharge on homes worth £2m and above, with the first bills in March 2028. It said it will bring in a deferral scheme, a series of discounts and exemptions, and a 100% premium on properties left empty and unoccupied for 12 months or more.

A new First Time Buyer ISA will be released in April 2029. It allows contributions of up to £4,000 a year with a 25% government bonus, paid on withdrawals for a first home costing up to £450,000. From 29 October 2026, the withdrawal charge on Lifetime ISAs used for homes above £450,000 will fall to 20%, according to the Budget document.