Property tax
Landlords: Tax on Rental Profit Rises to 24%, 44% and 49% from April 2027 (Worked Examples)
The Budget on 28 October 2026 added two more points to the new property income rates. From 6 April 2027 rental profit is taxed at 24%, 44% and 49%. Six worked examples show what that costs, and what landlords can do before April 2027.
On this page7 sections
- The new rates
- Six worked examples
- Example 1: basic rate landlord
- Example 2: higher rate landlord
- Example 3: full-time landlord
- Example 4: retired landlord, and the ordering rule
- Example 5: the £100,000 trap
- Example 6: additional rate landlord
- The six landlords side by side
- How a company compares
- What to do before April 2027
- FAQs
- When do the new landlord tax rates start?
- Why 24% and not 22%?
- Does the mortgage interest credit go up too?
- Do property companies pay the new rates?
- Are savings taxed at the new rates too?
- I live in Scotland. Does this apply to me?
- Talk to our team
- Sources
Key takeaways
- 1The personal allowance stays at £12,570 and the basic rate band at £37,700.
- 2Each landlord lives in England and has no savings or dividend income.
- 3A company does not pay the new property rates.
Quick answer: From 6 April 2027, rental profit in England, Wales and Northern Ireland will be taxed at 24%, 44% and 49%, four points above today's 20%, 40% and 45%. Budget 2025 had already legislated a two-point rise. The Budget on 28 October 2026 added a further two points from the same date. A higher rate landlord with £40,000 of rental profit and £15,000 of mortgage interest will pay about £1,000 more a year. The worked examples below show the effect for six types of landlord, and the planning worth looking at before April 2027.
This article is general information. The figures are illustrations, not client examples. Please take advice before acting.
The new rates
| 2026/27 | From 2027/28 | |
|---|---|---|
| Rental profit in the basic rate band | 20% | 24% |
| Rental profit in the higher rate band | 40% | 44% |
| Rental profit in the additional rate band | 45% | 49% |
| Section 24 credit on mortgage interest | 20% | 24% (see below) |
| Trustees, property income | 45% | 49% |
| Salary, pension and trading income | 20%, 40%, 45% | Unchanged |
| Companies (corporation tax) | 19% to 25% | Unchanged |
The personal allowance stays at £12,570 and the basic rate band at £37,700. Scotland sets its own rates, and the Senedd has the power to set Welsh property rates.
Mortgage interest. Under Section 24, landlords cannot deduct mortgage interest. Instead they get a tax credit on it at the property basic rate. The Finance Act 2026 links the credit to that rate, so it rises with it. The Budget 2026 documents do not say otherwise, so our examples use a 24% credit from 2027/28. If that changes, mortgaged landlords will pay more than shown here.
The ordering rule. From 2027/28, rental profit is taxed as the top slice of your non-savings income, after salary, pension and self-employed profit. Your personal allowance and basic rate band are used by that other income first. Example 4 shows why this matters.
Six worked examples
Each landlord lives in England and has no savings or dividend income. "Rental profit" means rent less allowable costs, before mortgage interest.
Example 1: basic rate landlord
Salary £30,000. Rental profit £20,000. Mortgage interest £6,000.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on rental profit | 20% x £20,000 = £4,000 | 24% x £20,000 = £4,800 |
| Less mortgage interest credit | 20% x £6,000 = (£1,200) | 24% x £6,000 = (£1,440) |
| Tax on the rent | £2,800 | £3,360 |
Extra tax: £560 a year.
Example 2: higher rate landlord
Salary £60,000. Rental profit £40,000. Mortgage interest £15,000.
The salary uses the personal allowance and the basic rate band, so all the rent falls in the higher rate band.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on rental profit | 40% x £40,000 = £16,000 | 44% x £40,000 = £17,600 |
| Less mortgage interest credit | 20% x £15,000 = (£3,000) | 24% x £15,000 = (£3,600) |
| Tax on the rent | £13,000 | £14,000 |
Extra tax: £1,000 a year. The cash profit after interest is £25,000, so tax takes 56% of it from 2027/28, up from 52%. That is Section 24 at work: interest is taxed at 44% and relieved at only 24%.
Example 3: full-time landlord
No other income. Rental profit £80,000. Mortgage interest £30,000.
| 2026/27 | 2027/28 | |
|---|---|---|
| Personal allowance | £12,570 at 0% | £12,570 at 0% |
| Basic rate band, £37,700 | £7,540 | £9,048 |
| Higher rate, £29,730 | £11,892 | £13,081 |
| Less mortgage interest credit | (£6,000) | (£7,200) |
| Total tax | £13,432 | £14,929 |
Extra tax: about £1,500 a year. The landlord keeps £50,000 of cash profit after interest and pays tax of almost 30% on it.
Example 4: retired landlord, and the ordering rule
Pension £15,000. Rental profit £15,000. No mortgage.
The pension uses the whole personal allowance, so every pound of rent is taxed from the first pound.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on the pension | £486 | £486 |
| Tax on rental profit | 20% x £15,000 = £3,000 | 24% x £15,000 = £3,600 |
| Total tax | £3,486 | £4,086 |
Extra tax: £600 a year, or 17% more than today. Without the ordering rule, the personal allowance could have covered rent instead of pension, and the 2027/28 bill would be about £500 lower. Pensioners with modest pensions and larger rental income are hit harder than the headline rate suggests.
Example 5: the £100,000 trap
Salary £90,000. Rental profit £30,000. Mortgage interest £10,000.
Because Section 24 does not deduct interest, total income is £120,000. The personal allowance is reduced by £1 for every £2 over £100,000, so £10,000 of it is lost.
| 2026/27 | 2027/28 | |
|---|---|---|
| Total tax (salary and rent) | £37,432 | £38,232 |
| Tax on the salary alone | £23,432 | £23,432 |
| Extra tax caused by the rent | £14,000 | £14,800 |
Extra tax: £800 a year. The rent produces £20,000 of cash after interest, and owning it costs £14,800 in tax: 74%. Landlords between £100,000 and £125,140 are in the worst position in the system.
Example 6: additional rate landlord
Salary £200,000. Rental profit £60,000. Mortgage interest £25,000.
| 2026/27 | 2027/28 | |
|---|---|---|
| Tax on rental profit | 45% x £60,000 = £27,000 | 49% x £60,000 = £29,400 |
| Less mortgage interest credit | 20% x £25,000 = (£5,000) | 24% x £25,000 = (£6,000) |
| Tax on the rent | £22,000 | £23,400 |
Extra tax: £1,400 a year. Tax takes 67% of the £35,000 cash profit.
The six landlords side by side
| Landlord | Cash profit after interest | Tax on rent 2026/27 | Tax on rent 2027/28 | Extra each year |
|---|---|---|---|---|
| 1. Basic rate | £14,000 | £2,800 | £3,360 | £560 |
| 2. Higher rate | £25,000 | £13,000 | £14,000 | £1,000 |
| 3. Full-time landlord | £50,000 | £13,432 | £14,929 | £1,497 |
| 4. Retired landlord | £15,000 | £3,000 | £3,600 | £600 |
| 5. £100,000 trap | £20,000 | £14,000 | £14,800 | £800 |
| 6. Additional rate | £35,000 | £22,000 | £23,400 | £1,400 |
Over ten years, the higher rate landlord in Example 2 pays £10,000 more, before any rent increases.
"Rental profit" means rent less allowable costs, before mortgage interest.
How a company compares
A company does not pay the new property rates. It pays corporation tax, and deducts mortgage interest in full. In Example 2, a company with the same £40,000 profit and £15,000 of interest would have £25,000 of taxable profit and pay corporation tax of £4,750 at 19%, against £14,000 of income tax personally.
That is not the whole comparison. Profits paid out to you as dividends are taxed again, and moving existing properties into a company can trigger capital gains tax, SDLT and refinancing costs, unless the conditions for incorporation relief and SDLT partnership relief are met. For landlords who reinvest their profits, and for those planning to pass a portfolio to the next generation, a company is often worth modelling. Our guide, is incorporating your property portfolio still worth it in 2026/27, works through the numbers.
What to do before April 2027
- Model both years. Two landlords with the same rent can see very different increases, depending on their other income.
- Review personal versus company ownership. See our property portfolio incorporation service. For longer-term family planning, a Family Investment Company may suit new purchases.
- Check who owns what. Where a spouse pays tax at a lower rate, moving beneficial ownership (with Form 17 filed within 60 days for jointly held property) can move rent into their bands.
- Watch the £100,000 edge. Pension contributions reduce adjusted net income, but relief depends on earnings, and rent does not count as earnings.
- Time discretionary spending. A planned refurbishment deducted in 2027/28 saves tax at the higher rates, though necessary repairs should never be delayed for tax reasons.
- Think about new purchases. If you plan to buy again, compare personal and company purchases using 2027/28 figures.
FAQs
When do the new landlord tax rates start?
From 6 April 2027, for the 2027/28 tax year onwards, in England, Wales and Northern Ireland.
Why 24% and not 22%?
Budget 2025 legislated property rates of 22%, 42% and 47%. The Budget on 28 October 2026 added a further two percentage points from the same date, taking them to 24%, 44% and 49%.
Does the mortgage interest credit go up too?
The Finance Act 2026 links the credit to the property basic rate, so on current law it rises to 24%. The Budget 2026 documents do not say otherwise, but this should be confirmed when the Finance Bill is published.
Do property companies pay the new rates?
No. Companies pay corporation tax at 19% to 25%, which is unchanged. Dividends paid out of the company are taxed separately.
Are savings taxed at the new rates too?
Yes. From 6 April 2027 savings income above the personal savings allowance is also taxed at 24%, 44% and 49%. Dividend rates do not change.
I live in Scotland. Does this apply to me?
Scotland sets its own income tax rates, and has been given the power to set property income rates. Check the Scottish rates for 2027/28 once they are published.
Talk to our team
Our specialists can model your portfolio under both years' rules and set out the options with figures attached. Advice is prepared by our specialist team and reviewed by a Chartered Tax Adviser, on fees agreed in advance. To start, book a call for a free 20-minute conversation.
Sources
- Budget 2026: overview of tax legislation and rates: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar
- Budget 2026, Annex A rates and allowances: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances
- Budget 2026 document: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html
- Income tax changes resulting from new savings and property rates: https://www.gov.uk/government/publications/income-tax-changes-resulting-from-new-savings-and-property-rates/changes-to-savings-and-property-rates-of-income-tax
- Tax rates for property, savings and dividend income from April 2027 (Budget 2025): https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income/income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income
This article is general information, not advice. Tax rules change and their effect depends on your circumstances.
Landlords can find more guides and tools at our specialist practice, Property Tax Advisory.
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