A leading Midlands law firm has said today’s Budget brings welcome help for first-time buyers but a second tax hit in two years for landlords.
Davisons Law was responding to Chancellor John Healey’s first Budget on Wednesday 28 October, which confirmed a new scheme to help first-time buyers onto the property ladder alongside a further rise in tax on rental income.
From spring 2027, first-time buyers in England will be able to buy a new-build home with a deposit of just 2.5% through the new Your First Home scheme. The rest will be made up by a mortgage and a government equity loan worth 20% of the property’s value, interest-free for an initial period. The scheme is backed by £4.7 billion of government lending.
A new First Time Buyer ISA will also replace the Lifetime ISA. From today, buyers whose home costs more than the Lifetime ISA limit will get back at least what they put in. The annual tax-free cash ISA limit will stay at £20,000, and stamp duty was left unchanged.
Sam Ingram, Equity Director at Davisons Law, said: “Saving for a deposit is the biggest hurdle most first-time buyers face, so a scheme that brings it down to 2.5% could be a real game-changer, particularly for those who don’t have family help behind them.
“It should also give a boost to new housing supply. Buyers need to remember that the equity loan has to be repaid and will be secured against the property, so it’s important to get proper advice and understand the terms before reserving a new build.”
For landlords, the news was less positive. Tax on income from property will rise by a further two percentage points from April 2027, on top of the increase announced in last year’s Budget. It means landlords will pay 24%, 44% or 49% on rental income, depending on their tax band.
The rise comes as landlords are already adjusting to the Renters’ Rights Act, which has brought major changes to how properties are let.
Umran Sadiq, Equity Director at Davisons Law, said: “This is the second Budget in a row to target landlords, and coming so soon after the Renters’ Rights Act, many will be feeling squeezed from every direction.
“Higher tax on rental income, along with more regulation, will lead some landlords to review whether it still makes sense to keep their properties, particularly smaller landlords with one or two homes. Anyone thinking about selling, restructuring or passing property on should get advice early, well before the changes take effect in April 2027.”
