Landlord tax rise from April 2027: the new property income rates
Short answer
From 6 April 2027, rental profits are taxed at new property rates of 22%, 42% and 47% in England, Wales and Northern Ireland, 2 points above today's rates. Mortgage interest relief rises to 22%. Landlords who own through a limited company aren't affected by these rates.
From 6 April 2027, rental profits get their own Income Tax rates, each 2 percentage points higher than today. The change was announced in the November 2025 Budget and confirmed in HMRC’s policy paper. The government estimates about 2.4 million landlords will pay more.
Old and new rates
| Band | Until 5 April 2027 | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 22% (property basic rate) |
| Higher rate | 40% | 42% (property higher rate) |
| Additional rate | 45% | 47% (property additional rate) |
These rates apply in England, Wales and Northern Ireland. Scotland and Wales are being given powers to set their own property rates, so Scottish (and potentially Welsh) landlords should watch for their own announcements.
Who is affected
- Individual landlords who own property in their own name, including jointly with a partner.
- Not landlords who own through a limited company. Company profits pay Corporation Tax, but the dividends you take out are taxed more from April 2026 (10.75% basic, 35.75% upper).
- If your rental income is under £1,000 a year, the property allowance still means you don’t pay tax on it.
Mortgage interest relief goes up too
Individual landlords can’t deduct mortgage interest from rental profit. Instead they get a tax credit at the basic rate. From April 2027, that credit is given at the new 22% property basic rate instead of 20%, so the relief rises a little alongside the tax.
What it costs: two examples
Basic-rate landlord: £30,000 salary and £10,000 rental profit (before mortgage interest), with £4,000 of mortgage interest.
- Now: £10,000 × 20% = £2,000, minus £800 interest credit = £1,200
- From April 2027: £10,000 × 22% = £2,200, minus £880 credit = £1,320 (+£120 a year)
Higher-rate landlord: £60,000 salary and £15,000 rental profit, with £6,000 of mortgage interest.
- Now: £15,000 × 40% = £6,000, minus £1,200 credit = £4,800
- From April 2027: £15,000 × 42% = £6,300, minus £1,320 credit = £4,980 (+£180 a year)
The credit is capped at the basic rate even for higher-rate landlords, which is why higher-rate landlords with big mortgages feel the change most.
Your income is now taxed in a new order
From April 2027, the personal allowance and other reliefs are applied to your job, pension or self-employed income first, and to property, savings and dividend income last. For most people this makes no difference. For some, more of the rent ends up taxed at the higher property rates.
What landlords are doing before April 2027
- Timing repairs: allowable costs paid on or after 6 April 2027 save tax at 22/42/47% instead of 20/40/45%, so some landlords are pushing planned spending into 2027/28. Only do this for work you’d do anyway.
- Reviewing ownership: moving a share to a lower-earning spouse, or into a company, can reduce tax, but can also trigger Capital Gains Tax and Stamp Duty. Get professional advice first.
- Checking rent and costs: work out your 2027/28 bill with the new rates before setting next year’s rents.
Getting the return right
The new rates make allowable expenses worth more, so the biggest saving for most small landlords is claiming everything they’re entitled to: letting agent fees, repairs, insurance, replacement furnishings, mileage and the mortgage interest credit. If you’d rather not work through it yourself, an online accountant will prepare and file the return for a fixed fee.
Also changing in April 2027: tax on savings interest and the cash ISA limit.
Sources: HMRC policy paper; ACCA on finance cost relief. Examples are simplified and ignore other income and allowances. General information, not tax advice.
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