From 6 April 2027, rental income in England, Wales and Northern Ireland will be taxed at its own rates of 22%, 42% and 47%. Each is two percentage points above the rate on wages. HMRC set out the change in a technical note published alongside the November 2025 Budget, and it was included in the Finance Bill 2025 to 2026.
The government’s landlord tax hikes did not arrive in one go. They follow a 5% Stamp Duty surcharge on additional homes, the end of the furnished holiday lettings regime and Making Tax Digital for landlords. This guide sets out every change, shows what the 2027 rise costs in pounds for different landlords, and explains the decisions worth making before April 2027.
Quick Answer: What Are the Landlord Tax Hikes?
The main landlord tax hike is a new set of Income Tax rates for property income from 6 April 2027: 22% basic, 42% higher and 47% additional. Mortgage interest relief for individual landlords rises from 20% to 22% at the same time. The net effect is roughly an extra 2% of your rental profit after mortgage interest, so a landlord making £7,000 after interest pays about £140 more a year. These rates cover England, Wales and Northern Ireland, and companies are not affected because they pay Corporation Tax. Landlords also face a 5% Stamp Duty surcharge on additional homes and Making Tax Digital quarterly reporting once qualifying income passes £30,000 from April 2027.
Key Takeaways
- Property income tax rates rise to 22%, 42% and 47% from 6 April 2027.
- The Section 24 mortgage interest credit rises from 20% to 22% at the same time.
- The extra tax works out at about 2% of rental profit after mortgage interest.
- Personal allowances must be used against wages and pensions before rental income.
- Limited companies are unaffected, so the gap with personal ownership widens.
Quick Answer: How Much Will Landlord Tax Rise?
For most individual landlords, the 2027 rise adds around 2% of their true profit, meaning rent minus running costs and mortgage interest. That is usually a few hundred pounds a year rather than thousands.
The bigger story is the direction of travel. Each change since 2024 has added cost or paperwork, and many landlords are now rethinking how they own property.
Every Landlord Tax Change, 2024 to 2028
Here is the timeline of measures that affect UK residential landlords. Most apply across the UK, but the new property income rates apply only in England, Wales and Northern Ireland.
| Date | Change | Who it hits |
|---|---|---|
| 31 October 2024 | Stamp Duty surcharge on additional homes rises to 5% in England and Northern Ireland | Anyone buying a second or further home |
| 6 April 2025 | Furnished holiday lettings tax regime abolished | Holiday let owners, who now follow normal rental rules |
| 6 April 2026 | Making Tax Digital starts for qualifying income over £50,000 | Larger individual landlords and sole traders |
| 6 April 2027 | Property income rates of 22%, 42% and 47%, and finance cost credit at 22% | Individual landlords in England, Wales and Northern Ireland |
| 6 April 2027 | Making Tax Digital threshold falls to £30,000 | Mid-sized landlords |
| 6 April 2028 | Making Tax Digital threshold falls to £20,000 | Smaller landlords |
Capital Gains Tax on residential property has stayed at 18% and 24% since April 2024. Gains on UK homes must still be reported and paid within 60 days of completion.
The 2027 Property Income Tax Rates Explained
According to the HMRC technical note on property income, the government’s reasoning is that income from assets pays no National Insurance, unlike income from work. The higher rates are meant to narrow that gap.
| Tax band | 2026/27 rate on rent | 2027/28 property rate |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
| Mortgage interest credit | 20% | 22% |
Three details in the note matter more than the headline rates:
- Property income gets its own slot. It will be taxed after wages, pensions and trading profits, but before savings and dividends.
- Allowances must go on other income first. Your Personal Allowance and other reliefs must be set against non-property income before rental profit. You lose some freedom to arrange income in the most tax-efficient order.
- Some things stay the same. The £1,000 property allowance and Rent a Room Scheme are unchanged, and carried-forward property losses still set against property income.
Scotland is different. The new rates apply in England, Wales and Northern Ireland only. The government says it will work with the Scottish and Welsh governments so they can set their own property income rates.
What the Landlord Tax Hike Costs You
Because mortgage interest relief also rises by 2 points, the extra tax works out at about 2% of your rental profit after interest. Here is how that plays out in 2027/28 for four typical landlords, assuming tax bands stay frozen.
| Landlord | Profit before interest | Mortgage interest | Tax now | Tax from 2027 | Extra a year |
|---|---|---|---|---|---|
| Basic rate, £30,000 salary | £10,000 | £4,000 | £1,200 | £1,320 | £120 |
| Higher rate, £60,000 salary | £15,000 | £8,000 | £4,400 | £4,540 | £140 |
| Additional rate, £150,000 salary | £30,000 | £12,000 | £11,100 | £11,460 | £360 |
| Retired, rent is only income, no mortgage | £20,000 | £0 | £1,486 | £1,635 | £149 |
Take the higher rate landlord. Today, they pay 40% on £15,000 (£6,000) and get a 20% credit on £8,000 of interest (£1,600), so the bill is £4,400. From April 2027, it becomes 42% on £15,000 (£6,300) less a 22% credit (£1,760), or £4,540.
Mortgage-free landlords and those with large portfolios feel it most, because their profit after interest is highest. Heavily geared landlords see a smaller change, since the larger interest credit cancels much of the rise.
Why the Rise Feels Bigger Than 2%
The headline change looks modest, but several pressures land together. That is why landlord groups describe it as part of a wider squeeze rather than a one-off rise.
- Section 24 still taxes profit before interest. Higher rate landlords pay 42% on profit before interest but only get 22% back on the interest. Rising mortgage rates can still leave some paying tax on money they never keep.
- Frozen thresholds. With Income Tax bands frozen, rising rents pull more landlords into the higher rate band each year.
- Compliance costs. Making Tax Digital means quarterly updates and compatible software, which many landlords will pay an accountant to handle.
- Buying costs. On a £250,000 buy-to-let in England, the 5% surcharge takes Stamp Duty from £2,500 to £15,000, based on the residential Stamp Duty rates.
Before buying, check whether a deal still works once all these costs are included. The buy-to-let mortgage calculator tests rental cover and compares personal and company ownership side by side.
Personal Ownership vs Limited Company After 2027
Companies pay Corporation Tax, not Income Tax, so the 2027 property rates do not touch them. They can also deduct mortgage interest in full.
Using the higher rate example above, a company with the same £7,000 profit after interest would pay £1,330 at the 19% small profits rate. The individual pays £4,540 from April 2027.
That gap is real but not the whole picture. Getting money out of a company means dividend tax, now 10.75% or 35.75% after the allowance. Company buy-to-let mortgages often cost slightly more, and moving existing properties into a company can trigger Stamp Duty and Capital Gains Tax on the transfer.
A company tends to suit new purchases, profits that will be reinvested rather than spent, and higher rate taxpayers growing a portfolio. Our guide to the limited company buy-to-let mortgage covers how an SPV works in practice.
Making Tax Digital for Landlords
Making Tax Digital for Income Tax changes how you report, not how much you pay. Once in scope, you must keep digital records, send HMRC a summary every quarter and file a final declaration after the tax year.
HMRC’s guide to Making Tax Digital eligibility sets the timetable by qualifying income, which is gross rent plus any self-employed turnover:
- Over £50,000 in 2024/25: required from 6 April 2026.
- Over £30,000 in 2025/26: required from 6 April 2027.
- Over £20,000 in 2026/27: required from 6 April 2028.
The thresholds use gross income, not profit. A landlord collecting £2,600 a month in rent passes £30,000 even if mortgage costs leave little profit.
How to Prepare Before April 2027
The new rates start in less than six months. That still leaves time for sensible changes, without rushing into costly restructuring.
- Work out your exposure. Take last year’s rental profit, subtract mortgage interest and multiply by 2%. That is your rough extra bill from 2027/28.
- Check your tax band. If rental profit pushes you just over £50,270 of total income, the higher rate applies to the top slice. Small changes in timing or pension contributions can keep more income in the basic band.
- Review who owns what. Spouses and civil partners who share ownership can each use their own allowance and basic rate band, provided ownership is genuine and HMRC is told where needed.
- Use pension contributions. Personal pension contributions extend your basic rate band, which can lower the rate paid on rental profit for higher rate landlords.
- Plan new purchases carefully. Compare personal and company ownership before you buy, because restructuring later is far more expensive.
- Keep digital records now. Even if Making Tax Digital does not apply yet, bookkeeping software makes the switch painless and helps you claim every allowable expense.
None of these steps needs to be taken in isolation. The right mix depends on your income, portfolio size and plans for the next five to ten years.
Common Mistakes Landlords Make With the Changes
- Assuming the 2% rise applies to rent. It applies to taxable profit, and the bigger interest credit offsets part of it.
- Rushing to incorporate. Transferring existing properties into a company can cost more in Stamp Duty and Capital Gains Tax than years of savings.
- Ignoring joint ownership. Spouses and civil partners can sometimes rebalance ownership, but a Form 17 declaration and genuine beneficial ownership are needed.
- Missing the 60-day Capital Gains Tax deadline. Selling before 2027 still means reporting and paying within 60 days of completion.
- Leaving Making Tax Digital too late. Software choices and record-keeping habits take time to set up.
Tax planning for property depends heavily on personal circumstances. Speak to a qualified property tax adviser before selling, restructuring or transferring ownership.
Frequently Asked Questions
When do the landlord tax hikes start?
The new property income tax rates of 22%, 42% and 47% apply from 6 April 2027, the start of the 2027/28 tax year. Other changes, such as the 5% Stamp Duty surcharge, are already in force.
Do the new property tax rates apply in Scotland?
No. The separate property rates apply in England, Wales and Northern Ireland. Ministers have said it will work with the Scottish and Welsh governments so they can set their own property income rates.
Will mortgage interest relief change in 2027?
Yes. The tax credit for residential finance costs will be given at the new 22% property basic rate instead of 20%. That partly offsets the higher tax rates for landlords with mortgages.
Are limited company landlords affected?
No. Companies pay Corporation Tax on rental profits, so the new Income Tax rates do not apply. Directors still pay the higher 2026/27 dividend tax rates when they take profits out.
How can I avoid paying 40% tax on rental income?
Options include sharing ownership with a lower earning spouse, paying more into a pension, or holding new purchases in a company. Each has costs and rules, so take advice before making changes.
Is the property allowance changing?
No. The £1,000 property allowance and the Rent a Room Scheme are unchanged by the 2027 reforms.
Your Next Actions
The government’s landlord tax hikes are modest in pounds for most individual landlords, but they add to a steady rise in costs and paperwork. Start by working out your rental profit after interest and multiplying it by 2%. That gives a fair estimate of the extra tax from April 2027.
Then check whether Making Tax Digital applies to you, and when. If your gross rent is above £20,000, choose software and tidy your records now. Planning to buy? Run new purchases through the buy-to-let mortgage calculator to compare personal and company ownership.
Finally, make sure your Self Assessment tax return for 2025/26 is filed by 31 January 2027. If you are considering selling or restructuring, book a review with a property tax adviser before 6 April 2027.
