Last updated: 14 October 2026
Will UK landlords pay more tax under the government’s plans?
Yes, from April 2027. The Budget on 26 November 2025 created separate income tax rates for property income. From 6 April 2027, rental profits will be taxed at 22% for basic-rate taxpayers, 42% for higher-rate and 47% for additional-rate, two percentage points above the rates on earnings. These rates apply in England, Wales and Northern Ireland, with Scotland and Wales able to set their own. Mortgage interest relief stays as a basic-rate tax credit.
Tax on rental profits
| Taxpayer | 2026/27 | From 2027/28 |
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
Other changes affecting landlords
- Making Tax Digital: landlords and sole traders with qualifying income over £50,000 joined from 6 April 2026; the threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
- Furnished holiday lettings: the special regime ended on 6 April 2025, so holiday lets are taxed like other residential lets.
- SDLT surcharge: 5% on additional homes since 31 October 2024.
- Renters’ Rights Act: ends section 21 “no fault” evictions in England, bringing new compliance duties.
- High Value Council Tax Surcharge: from April 2028 on homes in England worth £2 million or more.
Example
Tom, a higher-rate taxpayer, has £24,000 of rental profit before finance costs and pays £8,000 of mortgage interest. In 2026/27, his tax on the profit is £9,600 at 40%, less a £1,600 credit (20% of £8,000), so £8,000. In 2027/28, with the same figures, his tax is £10,080 at 42%, less a credit at the property basic rate of 22%, £1,760, so £8,320. That’s about £320 a year more.
Is a company better?
Companies pay corporation tax at 19% to 25% and can deduct mortgage interest in full. But extracting profits means dividend tax, and transferring existing properties into a company usually triggers Capital Gains Tax and SDLT. It tends to suit landlords with large portfolios, high mortgages and plans to reinvest. Get modelled advice before moving properties.
Ways to reduce the impact
- Claim every allowable expense, including agent fees, repairs and insurance
- Consider transferring a share of property to a spouse with a lower tax rate
- Use pension contributions to bring income below higher-rate thresholds
- Review the timing of repairs and replacements of furnishings
Who is hit hardest
Landlords whose rental income pushes them into a higher band feel the change most, because the extra 2 points apply to the top slice. Property income is taxed after earnings and before savings and dividends, so a salaried landlord’s rent often falls into the 42% band. Landlords who rely on rent for retirement income may stay within the 22% band.
Check your mortgage costs
With base rate at 3.75%, many landlords coming off fixed deals face higher interest costs. Because relief is limited to a basic-rate credit, higher-rate landlords pay tax on profit they don’t really make after interest. Review whether paying down debt, refinancing or selling weaker properties improves your net return.
Frequently asked questions
Do the new rates apply to my salary?
No, only to property income.
Will the Personal Allowance change?
It stays at £12,570, frozen to April 2031.
Does the change affect Scotland?
Scotland can set its own property rates.
When must I act?
Before 6 April 2027 for most planning.
Related: the proportional property tax, what landlords can claim and Form 17 for landlords.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with landlord tax planning. See our landlord accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
