Whatever the Chancellor announces on 28 October, one tax rise for landlords is not up for debate, because it is already on the statute book. From 6 April 2027, the tax rates on rental income go up by two percentage points across every band — and no Budget speech can quietly make that go away.
If you own rental property in your own name, this is the change to plan around. Here is what is happening, what it costs on a typical property, and the sensible moves to make in the five months before it lands.
The Change: 22%, 42% and 47% From April 2027
Under the Finance Act 2026, which received Royal Assent in March 2026, income tax on property income rises from April 2027:
| Band | Now | From 6 April 2027 |
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
The new rates apply to rental profits in England, Wales and Northern Ireland. Scotland sets its own income tax rates and is not covered by this change. Crucially, these are separate, higher rates that apply only to property income — your salary and other earnings keep the standard rates.
The Section 24 Squeeze Makes It Bigger Than It Looks
Two points on the rate is only half the story. Since 2020, landlords have not been able to deduct mortgage interest from rental income; instead you get a tax reduction of 20% of your interest costs — and that stays at 20% even as the rates rise. So a higher-rate landlord will pay tax at 42% on income that includes money already spent on interest, while still only getting relief at 20%. The gap between the tax rate and the relief rate widens from 20 points to 22.
What It Costs: A Worked Example
Take a higher-rate landlord with one property let at £30,000 a year, running costs of £6,000, and mortgage interest of £9,000. Because interest cannot be deducted, taxable profit is £24,000, and the 20% interest reduction is worth £1,800.
In 2026-27: tax at 40% on £24,000 is £9,600, minus the £1,800 reduction = a bill of £7,800.
From April 2027: tax at 42% on £24,000 is £10,080, minus the same £1,800 reduction = a bill of £8,280.
That is £480 more every year, on one property. Scale it across a portfolio, or a higher rent, and the extra tax quickly runs into thousands. Basic-rate landlords pay the same two extra points on their profits.
And Then There Is Making Tax Digital
April 2027 brings a second change. Landlords whose combined qualifying income — rent plus any self-employment income — exceeds £30,000 must join Making Tax Digital for Income Tax: keeping digital records and sending quarterly updates to HMRC through approved software, instead of one annual return. If that threshold catches you, the time to move your records onto software is this winter, not next March.
What Sensible Landlords Are Doing Now
Re-run your yield with the new rates. A property that cleared your target return at 40% may not at 42%. Our Buy-to-Let Yield Calculator in the UK Home Buyer Toolkit will show you the gross and net picture in minutes.
Mind the timing of genuine expenses. Repairs and other allowable costs you are genuinely planning are worth more against this year’s tax bill if they fall in 2026-27 while your profit is taxed at the lower rate — and worth more still against profits that would otherwise be taxed at 42%. Keep invoices either way.
Review rents lawfully. Many landlords have not adjusted rents since before the interest-rate shock. A lawful, market-based review — following the terms of your tenancy and current rules — is the straightforward way to protect your margin.
Think hard before incorporating. Moving property into a limited company swaps income tax for corporation tax, but the transfer itself can trigger stamp duty and capital gains tax, and lenders’ buy-to-let company rates differ. For some portfolios it wins; for many it does not. It is a decision to model properly with an accountant, not a reaction to a headline.
Get digital-ready. If your rental income is anywhere near £30,000, choose your MTD-compatible record-keeping now and run it in parallel with your current system for a few months.
Frequently Asked Questions
When do the new landlord tax rates start?
6 April 2027. Rental profits are taxed at 22%, 42% and 47% from that date, depending on your band — up two points from 20%, 40% and 45%.
Could the 28 October Budget change or cancel this?
In theory any government can legislate again, but the rise is already law in the Finance Act 2026 and nothing suggests it will be revisited. Planning on the basis that it happens is the sensible course.
Does it apply in Scotland?
No. Scotland sets its own income tax rates, and the property income rates announced in the Finance Act 2026 apply to England, Wales and Northern Ireland.
Does the rise affect limited company landlords?
No — companies pay corporation tax on profits, not income tax. That difference is exactly why incorporation gets discussed, but moving properties into a company can itself trigger stamp duty and capital gains tax, so it needs proper advice.
What is the Making Tax Digital threshold for landlords?
From April 2027, landlords (and sole traders) with total qualifying income over £30,000 must keep digital records and file quarterly updates. Rent counts towards the threshold, combined with any self-employment income.
This article is general information about announced tax changes, not personal tax advice — your position depends on your full income picture, so check the figures against your own with an accountant. Sources: Finance Act 2026 and GOV.UK property income tax rates; RealYield and HomeOwners Alliance Budget 2026 landlord briefings; HMRC Making Tax Digital guidance.
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