The Intermediary – December 2025 - Flipbook - Page 22
RESIDENTIAL
Opinion
When the devil is in
the detail, advice is
its own reward
R
achel Reeves’
November Budget
will be remembered
as one of the more
chaotic of the
past decade. Not
only was the Chancellor accused of
multiple leaks over several months
leading up to the statement, but in
an unprecedented botch, the Office
for Budget Responsibility (OBR)
accidentally released its analysis
before she stood up in the Commons.
The actual contents of the Budget
were more organised, if no less
complicated. There was a long list
of changes to personal taxes, many
of which will affect borrowers in the
years to come.
Big news for brokers
Income Tax and National Insurance
thresholds were frozen for another
year, with Reeves announcing this will
extend for three further years, from
April 2028 to 2031. According to OBR
calculations, this will result in almost
one in four taxpayers having to pay
some of their tax at the higher rate
by 2031.
The implications for affordability
are clear, even as people’s pay packets
increase (should that happen – but
that’s another question) their money
will go less far when this and inflation
is factored in.
Another significant announcement
relates to salary sacrifice. From April
2029 only the first £2,000 of pension
contributions made by each employee
through a salary sacrifice scheme will
be exempt from National Insurance
contributions (NICs).
Currently no cap exists, making
it a tax-efficient way for employees
to save for their retirement and for
employers to minimise their NI
contributions. When that goes, the
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The Intermediary | December 2025
cost of employment will yet again rise
for businesses.
A survey of more than 2,000
businesses conducted by the
Chartered Institute of Personnel and
Development (CIPD) earlier this year
found that a quarter of employers were
planning redundancies following the
hike to employer national insurance
contributions in April.
While not an immediate change,
the salary sacrifice cap is likely to
impact more jobs over the next few
years – something brokers will need
to address with clients ahead of
refinancing decisions.
For the self-employed, the big one
was the announcement of a 2% rise
to income tax payable on dividends,
taking rates to 10.75% at the ordinary
rate and 35.75% at the upper rate from
April next year.
This is likely to have a big impact for
the self-employed, the vast majority
of whom pay themselves £12,750 in
salary to benefit from the personal
allowance, with the rest paid out in
dividends. Again, the opportunity
for brokers to offer forward planning
advice is clear.
Landlords have also been given
yet another bit of bad news, with
a 2% increase in income tax rates
on property income set to come in
from April 2027, with new bands
of 22%, 42% and 47%. This will hit
those whose properties are held in
their own names rather than those
whose portfolios are held in a limited
company and could trigger another
wave of incorporation. While the
costs involved in selling buy-to-let
properties and repurchasing them
within a corporate are significant in
some sales, it may well be more taxefficient in the long term.
We expect landlords to look very
carefully at portfolios, particularly
ROB MCCOY
is senior product and business
manager at TMA
as upcoming energy performance
certificate minimum band regulations
also present further costs to bring
existing properties up to standard.
Given that so much of the UK’s
housing stock is effectively unfit for
energy efficiency improvements,
it’s possible landlords will be further
incentivised to sell older stock and
replace it with newer build homes
that meet the Energy Performance
Certificate (EPC) Band C minimum
requirements. All this activity will
need careful planning and advice.
Another change likely to affect
landlords is the removal of the twochild limit on Universal Credit from
April 2026. For registered social
landlords, this could have a positive
impact on tenants’ affordability. Given
the Renters’ Rights Act legislation
banning discrimination against
tenants who receive benefits or have
children, this change will at least
mitigate some of landlords’ woes.
The introduction of a ‘mansion tax’
on homes worth over £2m was widely
expected, and Reeves confirmed
the new High Value Council Tax
Surcharge (HVCTS) will see owners of
residential property in England worth
£2m or more in 2026, pay more every
year from April 2028.
The consensus from markets
was that this was a broadly positive
Budget for the UK economy, with the
FTSE 100 rising by around 100 points
following Reeves’ statement. How it
pans out over the coming years is one
to watch. Nevertheless, there will
be considerable need for advice in
its wake. ●
