Key changes in the housing market
| Landlords face reduced rental profitability as Income Tax on property earnings rises by two percentage points | The Lifetime ISA will be phased out and replaced by a simpler product | High-value homeowners may reconsider property decisions as new Council Tax surcharges target homes over £2m |
Although November’s Budget announcements may now feel like a distant memory, several measures introduced at the time remain highly relevant as we enter 2026. Here’s a reminder of the key changes that could affect you:
Landlords – new rental income rules
Landlords will see additional pressure from tax changes. From April 2027, Income Tax on rental earnings will go up by 2 percentage points across the board, raising the basic, higher and additional rates on property income to 22%, 42% and 47% respectively. For many buy-to-let investors, this will reduce after-tax rental yields, adding to the ongoing cost pressures.
Lifetime ISA to be replaced
The government has announced its intention to reform the Lifetime Individual Savings Account (LISA). A consultation on reforms is due in early 2026, with the aim of implementing ‘a new, simpler ISA product to support first-time buyers to buy a home.’ This marks a significant change for first-time buyers, who have relied on the LISA’s tax-benefits and the government bonus as a route to home ownership.
Council Tax changes
This has been dubbed by some as a ‘mansion tax’ and will apply from April 2028 to homes worth £2m or more in 2026. Owners (rather than tenants, who remain liable for Council Tax) of such properties will face a High Value Council Tax Surcharge (HVCTS) of £2,500 per year, rising to £7,500 for properties worth £5m or more.
Only a small fraction, around 0.5% of homes nationwide, are expected to be directly affected, with the greatest concentration in London and the South East. The measure may, however, have some impact on the wider market.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.
This article provides general tax information, tax treatment depends on individual circumstances and may change in the future.