From 6 April 2027, individuals pay Income Tax on rental profits at 24% (basic rate), 44% (higher rate) and 49% (additional rate) in England, Wales and Northern Ireland. That is four percentage points above the 20%, 40% and 45% paid today. Two points were announced in the November 2025 Budget and a further two in the Autumn Budget on 28 October 2026. Mortgage interest is still relieved as a tax credit at the property basic rate, now 24%. Limited companies are not affected by these rates.
How this guide helps a landlord
- See exactly which rate will apply to your rental profit and from when.
- Understand why higher-rate landlords feel the rise more than basic-rate landlords.
- Estimate the extra tax with clear worked examples.
- Prepare cash flow, records and questions for your accountant well before April 2027.
What the Budget changed
Rental income has been taxed at the same Income Tax rates as earnings: 20%, 40% and 45% for most taxpayers outside Scotland. The November 2025 Budget created separate property income rates and set them two points higher, at 22%, 42% and 47%, from April 2027.
The Autumn Budget 2026, delivered by Chancellor John Healey on 28 October 2026, raises those planned rates by a further two points. HMRC’s policy paper confirms property basic, higher and additional rates of 24%, 44% and 49% from 6 April 2027, with a 49% rate for property income received by trusts.
Both increases take effect on the same date, so in practice landlords move straight from today’s rates to the new ones. The change is due to be legislated in Finance Bill 2026–27. Treat the figures as announced policy until the Bill completes its passage through Parliament, but plan on the basis that they will apply.
Old and new rates side by side
| Band | 2026–27 (now) | Planned after Budget 2025 | From 6 April 2027 |
|---|---|---|---|
| Basic rate | 20% | 22% | 24% |
| Higher rate | 40% | 42% | 44% |
| Additional rate | 45% | 47% | 49% |
| Trusts (property income) | 45% | – | 49% |
The rate bands themselves are not changing in this measure. Your rental profit is still added to your other income to decide which band it falls into. From April 2027 the personal allowance is also set against employment, pension or trading income before property income, so more of a landlord’s rent is likely to fall into the higher property rates.
Savings income receives the same increase across the UK. Dividend tax rates are separate and are not covered by this guide.
Mortgage interest relief after the change
Since 2020, landlords who own residential lets personally cannot deduct mortgage interest from rental income. Instead, they receive a tax credit, worth a percentage of their finance costs. That credit is given at the property basic rate, so it rises from 20% to 24% from April 2027.
For a basic-rate landlord, the effect is neutral on interest: tax is charged at 24% and interest is relieved at 24%. For higher and additional-rate landlords, the gap remains. They pay 44% or 49% on profit calculated before interest, then receive relief at only 24%. Heavily mortgaged higher-rate landlords therefore feel the rise most, because the extra four points apply to income that is partly used to pay interest.
The usual restrictions on the credit, such as limits linked to property profits and adjusted total income, continue to apply. Your accountant should check how unused finance costs carry forward.
Worked examples
These simplified illustrations isolate the rate change for a landlord whose rental profit sits wholly in one band. They ignore other income, allowances and reliefs, and are not an estimate of anyone’s actual bill.
| Landlord | Profit before interest | Mortgage interest | Tax now | Tax from April 2027 | Extra each year |
|---|---|---|---|---|---|
| Basic rate | £12,000 | £4,000 | £1,600 | £1,920 | +£320 |
| Higher rate | £20,000 | £10,000 | £6,000 | £6,400 | +£400 |
| Higher rate, no mortgage | £20,000 | £0 | £8,000 | £8,800 | +£800 |
| Additional rate | £50,000 | £20,000 | £18,500 | £19,700 | +£1,200 |
How the higher-rate example works. Today: 40% of £20,000 is £8,000, less a 20% credit on £10,000 of interest (£2,000), leaving £6,000. From April 2027: 44% of £20,000 is £8,800, less a 24% credit on £10,000 (£2,400), leaving £6,400. Had only the 2025 Budget applied, the bill would have been £6,200, so this autumn’s Budget adds £200 of the £400 increase.
The mortgage-free comparison shows the full four-point rise: £800 on £20,000 of profit. Mortgage interest softens the increase because the credit also rises, but it never removes it for a higher-rate taxpayer.
Who is affected and who is not
- Affected: individual landlords, joint owners on their share of the profit, trustees and personal representatives receiving rental income.
- Affected: furnished holiday let owners, whose special regime has already ended, and commercial property owners who hold property personally.
- Not affected by these rates: property held through a limited company, which pays Corporation Tax instead.
- Check separately: landlords taxed as Scottish or Welsh taxpayers, because those governments can set their own property income rates.
HMRC estimates that around 2.4 million landlords will be affected by 2031–32. Small landlords using the £1,000 property allowance, and lodgers’ rent covered by Rent a Room relief, may see no change if those reliefs still cover their income.
Other Budget measures landlords should note
High Value Council Tax Surcharge. From April 2028, owners of residential properties in England valued at £2 million or more will pay an annual surcharge of between £2,500 and £7,500, depending on value band.
Third-party reporting. The government will consult on expanding the information third parties must report to HMRC about property income. Expect more of your rental data to be visible to HMRC, so keep records that match agent statements.
Incorporation. The widening gap between Income Tax and Corporation Tax will lead some landlords to consider a company. Since April 2026, incorporation relief from Capital Gains Tax must be claimed rather than applying automatically, and Stamp Duty can also arise. Take advice before transferring any property.
Making Tax Digital. The rollout continues. Landlords with qualifying property and self-employment income over £30,000 join from April 2027, and over £20,000 from April 2028. See our Making Tax Digital guide for how to test the threshold.
No change announced to the main Capital Gains Tax rates on residential property, the £1,000 property allowance or the Local Housing Allowance freeze.
What to do before April 2027
Get a projection now. Ask your accountant to model your 2027–28 tax using the new rates. The first year of the higher rates is 2027–28. Its balancing payment is normally due on 31 January 2029, and the higher bill also sets the payments on account for 2028–29 due from the same date.
Protect your margins. Higher tax makes every month of unpaid rent more costly. Chase arrears early and keep a clear rent schedule. If a tenant falls behind, our Ground 8 arrears guide explains the current threshold and evidence.
Review rent properly. Rising costs may justify a rent review, but in England increases for assured periodic tenancies must follow the Section 13 and Form 4A process, and tenants can challenge them at tribunal.
Do not rush structural decisions. Incorporating, transferring shares between spouses or selling can each trigger Capital Gains Tax, Stamp Duty Land Tax and lender consent issues. The tax saving from lower rates may not outweigh those costs.
Your practical action checklist
- Confirm whether you own rentals personally, jointly, in a trust or through a company.
- Ask your accountant to project your 2027–28 tax using the 24%, 44% and 49% rates.
- List each mortgage and its interest cost, and check the 24% finance-cost credit.
- Check whether your other income pushes rental profit into a higher band.
- Review cash flow and set aside more for the 31 January 2029 balancing payment and payments on account.
- Collect arrears early, because unpaid rent now weighs more heavily on margins.
- Plan any rent review through the proper Section 13 and Form 4A process.
- Get advice before incorporating, transferring ownership or selling.
Keep the projection, mortgage statements and agent statements together. Revisit the figures once Finance Bill 2026–27 is published, in case any detail changes during its passage through Parliament.
Questions landlords ask
When do the new rental income tax rates start?
From 6 April 2027, the start of the 2027–28 tax year. HMRC says the change will be legislated in Finance Bill 2026–27, so the rates are announced policy rather than law until that Bill is passed.
Do the new rates apply to landlords who own through a limited company?
No. These are Income Tax rates on property income received by individuals, trustees and personal representatives. A company pays Corporation Tax on its profits instead, although taking money out of a company can create separate personal tax.
Is mortgage interest relief changing?
Finance costs on residential lets are still relieved as a tax credit at the property basic rate, which rises to 24%. Basic-rate landlords therefore keep full relief at their own rate, while higher and additional-rate landlords still pay tax on profit before interest and receive relief at only 24%.
Do the rates apply in Scotland and Wales?
The published 24%, 44% and 49% rates cover England, Wales and Northern Ireland. The Scottish and Welsh governments have powers to set their own property income rates, so landlords taxed in those nations should check the rates that apply to them.
Does Help 4 Landlords give tax advice?
No. This guide summarises the official Budget documents so you can prepare. Ask an accountant or tax adviser about your own position. Help 4 Landlords can help with the tenancy side, such as recovering unpaid rent or regaining possession.
Authoritative sources
- HMRC: Income Tax – changes to tax rates for property and savings income (Budget 2026)
- HM Treasury: Budget 2026 – overview of tax legislation and rates
- HM Treasury: Budget 2026 document
- HMRC: Changes to tax rates for property, savings and dividend income (Budget 2025)
- HMRC: Making Tax Digital for Income Tax
Sources checked on . General tax information, not tax advice; obtain advice on your own tax position. Worked examples are illustrations, not client case studies.