IMLA warns of Budget cost for non-limited landlords

The Intermediary Mortgage Lenders Association (IMLA) has warned that non-limited company landlords could be disproportionately exposed to taxation following October’s Budget.

The IMLA’s report, The October 2026 Budget: Impact on the housing and mortgage markets, examines how the Budget’s further two percentage point increase in tax on rental income will affect individual landlords holding properties in their own names.

Combined with the increase announced last year, this takes the basic, higher and additional rates on rental income to 24%, 44% and 49% respectively from the 2027/28 tax year.

The IMLA illustrated an example of a £250,000 property with a £150,000 mortgage produces annual rental profit of £4,365 before tax.

A higher-rate taxpayer below the personal allowance withdrawal threshold would pay approximately 74% of that profit in tax from 2027/28, while an additional-rate taxpayer (earning more than £130,000) would pay approximately 86%.

For a landlord whose income falls between £100,000 and £125,140, where the personal allowance is progressively withdrawn, the effective rate can exceed 100%. In the report’s example of a landlord earning a £100,000 salary, the tax attributable to the rental income would reach approximately 124% of rental profit in the tax year 2027/28.

However, IMLA emphasises that reduced rental income does not automatically mean landlords will sell up.

Instead, Kate Davies, executive director at the IMLA (pictured above), argued this could push more landlords to explore the benefits of company ownership.

“Company ownership can offer a suitable structure for investment, including for those planning to pass their investment properties down to their children, but existing landlords also have to consider the costs of restructuring or selling,” said Kate.

“Understanding those choices is essential to assessing how the PRS will develop.”

She added that these kinds of tax implications could further impact housing shortages and the properties that tenants can afford.

“Investment by both individual and corporate landlords contributes to that supply,” said Kate.

“Policy needs to support a sustainable rental market which recognises the range of households who rely on it, including those for whom homeownership is currently – and is likely to remain - out of reach.”