Chancellor John Healey delivered his first Budget on 28 October. There was no headline wealth tax and no change to capital gains tax rates, but several measures will affect how property is financed, held and taxed, particularly for landlords, savers and anyone holding UK property through a structure.
Below we have set out the measures we think matter most for our clients, and our view on each.
Bank surcharge doubles for 15 months
Tax on bank profits rises from 28% to 31% between 1 January 2027 and 31 March 2028, as the bank surcharge increases from 3% to 6%. Only banks with UK profits above £100m pay, mainly the big high-street lenders. Specialist and non-bank lenders are unaffected.
Banks could absorb the cost in several ways:
- Borrowers - higher margins, fees or charges
- Savers - lower deposit rates
- Shareholders - lower profits and dividends
- Operations - cost cuts and efficiencies
Our view: Expect modest, gradual effects rather than a drastic change in pricing. A whole-of-market comparison across high-street, specialist and private banks is a must when considering finance options in 2027.
Rental income tax rises again
From 6 April 2027 in England, Wales and Northern Ireland, tax on rental income rises by four percentage points, on top of the rise announced in Budget 2025:
- Basic rate - 20% to 24%
- Higher rate - 40% to 44%
- Additional rate - 45% to 49%
Individual landlords pay, including non-residents, whose withholding rises in step. Company-owned property is unaffected.
Our view: Make sure to model returns at the new rates and review your ownership structure with a tax adviser before refinancing or buying in 2027.
Savings income tax rises to match
From April 2027, tax on savings interest rises to 24%, 44% and 49% across the UK, in line with the new property income rates.
Our view: With savings taxed harder and banks under pressure on deposit rates, using spare cash to overpay or offset a mortgage looks more attractive. Worth reviewing at your next refinance.
New restrictions on trust debt deductions
The Budget introduces tighter rules governing which trust liabilities can be deducted when calculating inheritance tax (IHT). Genuine liabilities remain potentially deductible, but certain related-party arrangements may no longer reduce the taxable value of trust assets. The rules apply to deaths and chargeable events from Budget day, 28 October 2026.
Our view: Trustees should review existing loan arrangements, particularly related-party lending, to ensure liabilities remain deductible under the new rules.
Sovereign investors lose their UK property tax exemption
From January 2029, certain UK property income and gains received by sovereign investors become taxable. A bespoke REIT route will offer a 15% rate on qualifying property income distributions. This is relevant to sovereign wealth funds and the institutions that invest in UK property on their behalf.
Our view: Review how UK holdings are structured now. Temporary stamp duty (SDLT) relief is proposed for moving property into a REIT, from 2028 until at least the end of 2030.
Overseas property ownership to be shared between tax authorities
The Budget restated the UK's commitment, first made in December 2025, to an OECD agreement for the automatic exchange of real-estate information, with first exchanges expected from 2029-30. This is potentially significant for internationally mobile property owners and their holding structures.
Our view: Fiduciaries should check that ownership records, beneficial-owner details and filings are consistent across every jurisdiction before exchanges begin. Clean records also make lender due diligence faster.
ATED charges rise, and a revaluation is coming
The Annual Tax on Enveloped Dwellings (ATED) applies to UK residential property worth more than £500,000 held by a company, a partnership with a corporate member or a collective investment scheme. It is charged every year, with the amount set by the property's value band.
The Budget confirmed that ATED charges will rise by 3.5% from 1 April 2027, in line with September's CPI. For reference, the annual charges for 2026/27 are:
- £500,001 to £1m - £4,600
- £1m to £2m - £9,450
- £2m to £5m - £32,200
- £5m to £10m - £75,450
- £10m to £20m - £151,450
- Over £20m - £303,450
For many owners, the bigger change is the revaluation. ATED values are reset every five years, and the next valuation date is 1 April 2027. From 2027/28, charges will be based on each property's value on that date rather than its value in April 2022. A property that has risen in value could move into a higher band and see its bill increase by far more than 3.5%.
Reliefs remain available, for example for property rental businesses, developers and traders, but they must be claimed through an annual ATED return, due by 30 April each year, even where no tax is payable.
Our view: Owners and trustees holding UK homes in companies should arrange a 1 April 2027 valuation in good time, check which band each property will fall into, and make sure any reliefs are being claimed correctly. Higher holding costs are also worth factoring into any refinancing, and into the wider question of whether a property should stay in a corporate structure.
Talk to us
Whether you are refinancing, buying or financing property held in a structure, we can help you understand how these changes affect your options. Please get in touch or email jg@convicicapital.com.
This article is for general information only and does not constitute tax or legal advice. Please speak to a qualified tax adviser about your own circumstances.