The shift: taxing wealth more like work
Budget 2025 continues a clear trend: income from assets is being taxed more heavily.
Over the next few years:
- Tax rates on rental property income will rise.
- Dividend tax goes up for many shareholders.
- Savings income sees higher rates too.
If you’re a small business owner with a property portfolio, a trading company paying dividends and money in the bank, you’re right in the firing line.
How this hits small business owners
- Landlords with side businesses
Higher rates on rental profits cut net yields. If your buy-to-lets prop up your business income, cashflow gets tighter. - Company directors relying on dividends
You may see more tax on the same level of dividends as the rates increase. - Savings outside ISAs and pensions
Interest on larger cash balances (for example, from a business sale or retained profits extracted) may be taxed more harshly.
What this means in real money
- A director taking, say, £40,000 in dividends on top of a salary will see more of that taxed at higher rates.
- A landlord with multiple properties will face rising tax bills without any increase in rent.
This combination quietly shifts the balance towards pensions and tax shelters and away from personally-held investments.
Action steps for owners, landlords and investors
- Review how you hold your rental properties
- Are they in your own name, or a company?
- Would incorporation now or in future improve the long-term tax position? (Get advice, there are big pros and cons.)
- Revisit your dividend strategy
- Can you smooth dividends over years rather than big spikes?
- Should you retain more profit in the company to invest for growth?
- Maximise ISA and pension allowances
- Use your ISA allowance every year for personal savings.
- Use employer pension contributions from the company for long-term investing.
- Model two scenarios
Ask your accountant to show you:
- Current structure over the next 5–10 years
- Alternative (e.g. some property in a company + more pension + different dividend profile)
Compare after-tax wealth, not just tax each year.
How can we help at MDH
Book a quick tax chat with me, no strings attached. We’ll have a look at your situation and spot opportunities you might be missing. And as a thank-you, I’ll send you a free copy of our book 75 Ways to Pay Less Tax, packed with simple, practical tips you can put to work straight away. Let’s make sure your money’s working smarter, not harder.
