The Spring Budget 2025 has introduced several significant changes affecting landlords, property investors, and the broader UK housing market. With adjustments to capital gains tax, stamp duty, and rental income taxation, these updates could reshape investment strategies for buy-to-let (BTL) landlords, HMO (House in Multiple Occupation) investors, and commercial property owners. In this blog, we’ll break down the key tax and policy changes announced in the Spring Budget 2025 and what they mean for property professionals.
1. Capital Gains Tax (CGT) Changes
Reduction in higher rate for residential property sales
One of the most notable changes is the reduction in the higher rate of Capital Gains Tax (CGT) on residential property sales, dropping from 28% to 24%. The lower rate remains at 18%.
Impact: This change is designed to encourage property sales and increase market liquidity. However, the annual CGT exemption has been halved from £6,000 to £3,000, meaning landlords selling second properties will pay more tax on gains above this threshold.
Abolition of Multiple Dwellings Relief (MDR) for Stamp Duty
The government has scrapped Multiple Dwellings Relief (MDR), which previously allowed investors buying multiple properties in a single transaction to reduce their Stamp Duty Land Tax (SDLT) liability.
Impact: Investors purchasing portfolios of residential properties (such as HMOs or blocks of flats) will now face higher upfront tax costs.
2. Stamp Duty Land Tax (SDLT) adjustments
No changes to residential SDLT thresholds
Despite speculation, the government did not increase the SDLT thresholds for residential property in the Spring Budget 2025. The current rates, which were reinstated after the end of the Stamp Duty Land Tax holiday, remain as follows:
Up to £125,000: You’ll pay an SDLT rate of 5% on this portion of the value.
£125,001 to £250,000: For the part of the value that falls within this range, the SDLT rate is 7%.
£250,001 to £925,000: The SDLT rate for this next chunk of the value is 10%.
£925,001 to £1.5 million: The portion of the value in this bracket will be taxed at an SDLT rate of 15%.
Above £1.5 million: For any remaining value exceeding £1.5 million, the SDLT rate is the highest at 17%.
Temporary SDLT relief for energy-efficient homes
A new time-limited SDLT discount has been introduced for properties with an EPC rating of C or above. Buyers of such homes could receive a 1% reduction in their SDLT rate until April 2026.
Impact: This incentivises landlords to invest in greener properties or upgrade existing ones to meet energy efficiency standards.
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3. Income tax and mortgage interest relief
No changes to income tax rates
The government confirmed that the basic rate of income tax remains at 20%, and the higher rate stays at 40%.
Impact: There is no change in tax bills for landlords based on income tax rates. Basic-rate taxpayers will continue paying the same rate, and higher-rate taxpayers will see no additional benefit.
Mortgage interest tax relief remains at 20%
The Section 24 mortgage interest relief restriction remains unchanged, meaning landlords can still only claim 20% tax relief on mortgage interest payments rather than deducting it from rental income.
Impact: Higher-rate taxpayers continue to face higher tax burdens on rental profits.
4. Furnished Holiday Lettings (FHL) regime abolished
A major surprise was the abolition of the Furnished Holiday Lettings (FHL) tax regime from April 2025.
Previously, FHL properties benefited from full mortgage interest relief, capital allowances, and lower CGT rates.
Now: These properties will be treated as standard rental businesses, losing their tax advantages.
Impact: Landlords with holiday lets may reconsider their investment strategy, potentially shifting to long-term rentals or selling assets.
5. VAT changes for energy efficiency improvements
VAT abolished on Energy-Saving Materials (ESMs)
The 5% VAT rate on energy-saving materials (e.g., insulation, solar panels, heat pumps) has been removed entirely, making these upgrades zero-rated for VAT.
Impact: Landlords can now retrofit properties more affordably, helping them comply with future EPC requirements (expected to be minimum C for new tenancies by 2028).
6. Changes to HMO & multi-unit property rules
Council tax reforms for HMOs
Some local councils are being given powers to reclassify HMOs from banded council tax to individual council tax per room, increasing costs for landlords.
Impact: HMO landlords may face higher operational expenses, reducing profitability unless rents are adjusted.
Selective licensing expansion
The government has expanded selective licensing schemes, allowing more councils to impose mandatory licensing on private landlords, particularly in high-demand areas.
Impact: Increased compliance costs for landlords, with potential fines for non-compliance.
7. Corporation tax & limited company landlords
Corporation tax remains at 25%
Despite rumours of a cut, the primary corporation tax rate stays at 25% for profits over £250,000, with a 19% small profit rate for earnings below £50,000.
Impact: Limited company landlords still benefit from full mortgage interest deductibility, making incorporation a tax-efficient strategy for higher-rate taxpayers.
Dividend allowance remains at £500
The tax-free dividend allowance remains at £500 for the 2025/26 tax year.
Impact: Investors and company shareholders will continue to benefit from a £500 tax-free dividend allowance. Dividend income above this amount will be taxed at the applicable dividend tax rates.
8. Empty property & second home council tax premium
Increased council tax premium on empty homes
Local authorities can now charge up to 100% extra council tax (double the standard rate) on properties that are empty for 1+ year (previously 2+ years).
Impact: Landlords leaving properties vacant for long periods will face higher penalties, encouraging faster lettings or sales.
9. Inheritance Tax (IHT) and Renters’ Reform Bill
Inheritance Tax (IHT):
From April 2025, the UK will move to a residence-based system for IHT. Individuals who have been UK residents for 10 out of the last 20 years will be liable for IHT on worldwide assets, regardless of domicile. This replaces the previous domicile-based system.
Impact: More long-term UK residents could face IHT on global estates. Planning will be essential for non-doms and expats.
Renters’ Reform Bill:
While not yet law, the Renters’ Reform Bill continues progressing through Parliament. It includes the abolition of Section 21 “no-fault” evictions and may come into effect later in 2025.
Impact: Landlords should prepare for significant changes in tenancy laws and eviction processes.
How should landlords and property investors respond?
The Spring Budget 2025 brings a mix of tax cuts (CGT reduction) and hikes (MDR abolition, dividend allowance cuts), with a clear push towards energy efficiency and compliance.
Key takeaways for property investors
- Review property portfolios—holiday let landlords may need to restructure.
- Invest in energy-efficient upgrades to benefit from VAT savings and SDLT discounts.
- Limited companies remain tax-efficient for higher-rate taxpayers despite dividend tax hikes.
- Prepare for higher council tax and licensing costs, especially for HMOs.
Conclusion
While some measures aim to stimulate the property market, others increase the tax burden on landlords. Investors must adapt their strategies to maximise returns under the new rules. For personalised tax planning advice, consult a property tax specialist or accountant to ensure compliance and optimise your investments.
