HMOs (House in Multiple Occupation) will be hit the hardest. These landlords tend to generate higher rental income per property of around 12%-18% ROI with typical six-bed homes, compared to standard 3%-6% ROI on a two-bed buy-to-let investors. HMOs will therefore shoulder a particularly large share of the 2% property tax hikes. These landlords house those on lower income, and those who most value connection with others.
Whilst landlords can’t raise the rent much whilst occupied, as tenants leave, landlords will reset rents to market rates, and as unprofitable properties exit the market, demand for those that remain will intensify. This will disproportionately affect professional tenants, both in single lets and HMOs, with HMOs reacting faster due to shorter tenancy cycles. Longer-term, we may see more properties shift towards social housing, where government rents often exceed market rates, further squeezing those seeking affordable, high-quality homes.
However, people often rent out of choice or because they can’t afford a deposit on a mortgage. Unlike home ownership, renting supports mobility, lets people move quickly for work, removes the burden of major upkeep, and, in shared living, gives people the connection and support that comes from living with others.
But undermining landlords’ viability risks reducing choice and flexibility for renters. The sector needs predictability and incentives to invest in better homes, not policies that drive out those committed to quality and community.
Instead of adding NI to rental income, the Government should focus on measures, such encouraging councils to approve more high-quality shared living and rental homes. There should be incentives to home creation, such as for converting a six- bed property, which is lower in demand, into six single bed properties, which are higher in demand.
Easing the stamp duty surcharge on second homes, reviewing mortgage interest rules, and dropping NI proposals would reduce costs and encourage investment in upgrading ageing stock. Treating secure, affordable rental housing as essential economic infrastructure, rather than a secondary concern, is the only way to restore balance and stability for millions who rely on the private rented sector.
The Chancellor has added 2% tax to dividend and savings income, making it 2% higher than equivalent income tax on employment income.
However, it must be borne in mind that you don’t pay national insurance on dividend or savings income, whereas you do on employment income.
There are already a number of tax reliefs available on dividend and savings income, some which only benefit lower earners. Interest and dividend income within a tax wrapper such as an ISA is tax free. This benefits high and low earners alike.
If your total income not including dividend and interest income is less than £17,570 pa (excluding ISAs), you are allowed to receive the first £5,000 of interest income tax free. This benefits lower earners.
Today was a missed opportunity for the Chancellor to introduce a first-of-its-kind ‘AI income tax’ that would shift the burden from hard working people onto the bots taking their jobs. Instead, the Budget relied on old fashioned levies, leaving everyday taxpayers to shoulder the cost while AI firms continue to benefit from lighter tax treatment.
With the National Living Wage rising, this was also the ideal moment to introduce a minimum wage for robot labour. The UK introduced the minimum wage in the late 1990s to ensure a fair labour market at a time when free movement across the EU was reshaping the workforce. It prevented ‘cheap’ human labour from the continent from undercutting British workers. Today, we face a similar challenge – but this time from software.
If we don’t extend minimum wage principles and tax rules to automated labour, we risk creating distortions far more serious than anything the single market produced. The bottom line is that a 21st century economy needs 21st century labour and tax rules, not regulations built for a world that no longer exists.
With the Chancellor’s limited scope to raise prevailing tax rates, we may see increased levels of scrutiny and enforcement being employed by HMRC as a revenue tool. It would be prudent to expect more enquiries into reorganisations, share buy-backs, goodwill valuation and business-property relief optimisation, meaning a greater focus on robust valuation methodology and tax clearances for transactional areas historically treated pragmatically.
Headline corporation tax may have stayed put, but frozen income tax thresholds, tighter deductions and the effects of inflation will lift effective rates for owner-managed businesses. Increases in dividend taxation will further affect how owners extract value. Combined with sharper HMRC scrutiny, the environment is set to become more demanding for smaller corporate groups.
The Lifetime ISA has provided an essential boost for hard-pressed young buyers, desperate to get into the property ladder. It has also proved a valuable way for people to save for retirement, especially self-employed people, who fall seriously short when it comes to pension contributions.
The right consultation on its replacement is vital, and needs to ensure that dedicated savers and investors, who have been putting money away for their first property or for retirement aren’t disadvantaged by any change.
Today’s announcement on the Lifetime ISA will be worrying for those who rely on it for their retirement savings. The LISA has the ability to have a huge impact on the retirement prospects for groups such as the self-employed. This is a group that is not included in auto-enrolment and so miss out on an employer contributions. They may also find pensions lack the flexibility that they need given as money cannot be accessed until at least the age of 55.
The bonus on the Lifetime ISA has the same effect as basic rate tax relief on a pension and any income can be taken tax free after the age 60. Added to this, money can be accessed early in case of emergency, albeit subject to an exit charge.
It’s a product has the potential on the long-term resilience of this group. The consultation into a replacement must consider the needs of self-employed people saving for retirement. They are already under-saving, so it’s important not to put any more barriers in the way.
VCT tax blow hidden in small print
The Chancellor has delivered a blow to investor and early-stage businesses alike by slashing the tax relief available on venture capital trusts. The Budget speech led with the positive news that both annual and lifetime limits would be reviewed to support scale up and not just start-up companies. This will be warmly welcomed by the industry which has called for limits to be re-examined to support broader growth opportunities.
But hidden in the small print of the Budget document was the detail that in order to ‘balance’ this change, the tax relief on VCTs would be cut from 30% to 20% following the 2025/26 financial bill – so investors have until the end of the tax year before the changes come into force.
We are encouraged by the measures announced in the Budget to support a retail investment culture, including the stamp duty tax break for IPOs, and the British investment hub.
However, the tax relief on VCTs has provided many investors with the incentive to support early-stage UK businesses, which in turn support the domestic economy – just the sort of growth this Government is championing. This tax change seems counter to that agenda.
HSBC UK is proud to support over 15 million customers and welcomes the Government’s efforts to drive growth across the country. We are therefore pleased to make available over £11bn of measures to back businesses and households.
We are supporting UK SMEs by making an additional £5bn of lending available over the next five years. This will underpin the growth ambitions of thousands of small businesses across the country, helping deliver on the objectives in the Government’s Small Business Plan.
We will increase cashback to first-time buyers from £700 to £2000 to help with the cost of buying a home. This is expected to mean an additional £1bn of lending and builds on our programme to increase borrowing limits for first-time buyers, allowing 24,000 more customers to get onto the housing ladder.
We will invest over £100m in our network – including ATMs – over the next three years and maintain our existing bank branch network in 2026. We will also create 1,000 highly skilled jobs over the next five years, offering mortgage and investment support to first-time buyers, homeowners and retail investors.
We will make available an additional £1bn of financing to the social housing sector in 2026 and a further £4bn by 2030. This will support the construction, renovation and management of tens of thousands of new social homes across the country.
By making available over £11bn of financing support, we can go further in driving SME expansion, helping first-time buyers onto the property ladder and supporting the customers and communities we are proud to serve.
The 2025 Budget locks in a structurally higher tax environment, with frozen thresholds, increased dividend and savings taxes, and tighter pension rules reshaping how UK clients save, invest and manage risk. These aren’t cyclical adjustments, they will alter domestic capital flows and retail trading patterns for the long term.
For INFINOX and similar multi-market brokers, the near-term impact will be tighter domestic liquidity as households absorb the fiscal shift. But over time, we expect greater appetite for global diversification, FX hedging and non-UK exposures as clients rebalance portfolios away from a compressed domestic market.
The £22bn fiscal headroom may stabilise gilt markets and dampen volatility at the policy level, but the broader environment remains one of consolidation rather than stimulus. In practice, this means clients will look for clearer risk frameworks, more transparent execution, and broader cross-border market access.
For a globally positioned firm, the Budget underscores the importance of scalable infrastructure, disciplined risk management and multi-jurisdictional market access, all essential for helping clients navigate a landscape where structural tax pressures and shifting capital allocations become defining features of the trading environment.
This tax rise could put more pressure on an already strained rental market as landlords might now look to sell their properties to avoid paying higher tax bills. I recommend that property owners review their investments and recalculate their returns to ensure that they are clear on what this tax rise will mean for them.
While the Chancellor is expecting to raise £2.1bn overall through personal tax rises, this property tax increase could put rent affordability under further pressure as well. Landlords may attempt to offset the increased tax burden by charging higher rents. Furthermore, if some landlords decide to sell up, the rental market becomes strained, which again may lead to higher prices for renters, as well as more competition in securing tenancies.
A balanced approach that recognises the importance of private landlords in providing housing and protects renters from high rent costs is needed, as both are essential to the stability of the property market.
However, now that the various personal tax rises have been confirmed, this certainty allows landlords to reassess their margins and plan for the future after much speculation and uncertainty. Renters should also keep an eye on any potential increase in rent costs in line with this tax increase.
What are the changes to SDRT?
Investors were previously expected to pay a 0.5% tax when electronically purchasing shares in UK companies. The tax was applied immediately, before seeing how the investment performed.
However, the government has recently announced a three-year exemption when purchasing shares in newly listed companies on the London Stock Exchange.
What does this change mean?
According to LSEG, UK ownership of domestic equities fell from 96% in 1981 to 42% in 2022. UK equities have also lost over £1.9tn to global markets since 2000. As such, the stamp duty holiday is likely to encourage investment in UK Initial Public Offerings (IPOs). The tax exemption will also encourage companies to list on the London Stock Exchange, helping the UK to compete New York and Frankfurt.
Encouraging long-term investments
While the tax exemption helps in the short-term, the UK government must continue to think of ways to encourage long-term investments.
For example, this could include reducing ongoing costs for listed companies, such as compliance fees, and providing long-term tax incentives to help companies attract and retain investors.
The reversal of last year’s ‘giveaway’ that there would be no extension to frozen income tax thresholds beyond 2028 means a further five years of fiscal drag which will continue to hit the public in the pocket. This, compounded by the increase in Employers’ National Insurance Contributions last year, means that nearly a quarter of taxpayers will be paying the higher rate by 2030.
This Budget has not been short of surprises. The biggest was that the downgrade to the economic forecasts was far smaller than anticipated. The Chancellor could have chosen to sit tight, but instead has delivered a substantial package of tax rises to fund some extra spending and to bolster the fiscal headroom. Crucially, a larger cushion against her fiscal rules will reduce the likelihood of further fiscal tinkering in the next Budget. Think tax and save, rather than tax and spend.
As many speculated, the Autumn Budget has highlighted tough economic conditions and delivered fresh challenges for UK businesses to face. Many businesses, particularly SMBs, will be impacted by the rise in national minimum wage, cap on NI exemption for the pension salary sacrifice and the slash on WDAs (writing down allowances). In response, some companies may panic pivot to blunt cost-cutting measures like hiring freezes or redundancies, but that approach risks damaging long-term growth.
Our recent research found that 88% of UK finance leaders believe restricting employees’ access to budgets actually stifles business growth. Because when smart spending is hindered or put on hold, opportunities get delayed and productivity suffers.
The focus therefore shouldn’t be on hastily cutting costs, but being smarter about where spend goes. By investing in transparent spend management tools and empowering teams with real-time visibility and control, businesses can protect efficiency and make every pound work harder. Financial control is about making informed, proactive decisions that safeguard efficiency and growth, even in uncertain times.
Taken together, these two measures appear to be an acknowledgement that the changes announced in last year’s Budget to the non-dom regime went too far, that the UK has lost too many of these individuals, and that policymakers have to do more to stem this outflow and get the country back to becoming an attractive destination for wealth. This is particularly important given the country’s top 1% of taxpayers contribute to a third of all tax revenue.
However, questions marks remain as to whether these measures will be effective in restoring trust among non-doms and the wider HNW community and prevent further departures. The £5m cap, while limiting the amount non-doms may ultimately have to settle, still represents a significant new charge for individuals who previously paid nothing before April 2025. Additionally, with the Government announcing £26 billion of tax-raising measures in this Budget alone, it is difficult to see how this will encourage new wealthy individuals to move to the UK.
“UK budget: financial services sector reaction” was originally created and published by Retail Banker International, a GlobalData owned brand.
The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
