Landlord Tax Rates of 22%, 42% and 47% from April 2027: What Changes and What to Do

Rental profit will have its own income tax rates from 6 April 2027. In England, Wales and Northern Ireland, landlords will pay 22%, 42% and 47% on property income, in place of today's 20%, 40% and 45%. The tax credit given for mortgage interest under Section 24 rises to 22% on the same date.

This is settled law, found in sections 6 and 7 of the Finance Act 2026, which received Royal Assent on 18 March 2026. The useful question is therefore how to use the time before it starts.

The changes side by side

The bands stay where they are. The personal allowance remains £12,570 and the basic rate band £37,700, both frozen until 2030/31.

Which income is caught

The new rates apply to "property income", defined in new section 17A of the Income Tax Act 2007. That means the profits of a UK or overseas property business, plus a few smaller items such as post-cessation receipts and some wayleave income. Buy-to-let rent, held personally or through a partnership, falls squarely inside.

Individuals, trustees and estates are affected. Companies are not. A property company continues to pay corporation tax, at 19% on profits up to £50,000 and 25% above £250,000, with marginal relief between the two.

The new rates apply to "property income", defined in new section 17A of the Income Tax Act 2007.

The ordering rule

A two-point rise grabs the headlines, but the ordering rule does more damage in some households.

From 2027/28, property income is treated as the top slice of your non-savings income, above salary, pension and self-employed profit and just below savings and dividends. Allowances and reliefs are used against the other income first.

Take someone with a £15,000 pension. Their personal allowance is absorbed by the pension, so every pound of rent is taxable from the first, at 22%. Today it makes no difference which income the allowance covers, because both are taxed at the same rates. After April 2027 it does.

What it costs: three illustrations

These are illustrations, not client examples. Each landlord lives in England and has no savings or dividends.

For the higher-rate landlord, 2026/27 tax is 40% of £30,000 (£12,000) less a 20% credit on £10,000 of interest (£2,000). In 2027/28 it is 42% (£12,600) less 22% (£2,200).

Because the credit rises with the basic rate, the extra cost works out at about 2% of profit after interest. The harder fact is unchanged: Section 24 still taxes the interest itself at 42% or 47% and returns only 22%. That leaves a 20-point gap for higher-rate landlords and 25 points for additional-rate landlords.

Who should look closest

• Landlords with income near £100,000. Section 24 adds interest back into taxable income, and the personal allowance falls by £1 for every £2 above £100,000. With the new rates, the effective rate in that band is severe.
• Additional-rate landlords with mortgages, facing the widest gap in the system.
• Pensioners with modest pensions and substantial rent, because the ordering rule moves the allowance onto the pension.
• Non-resident landlords, whose withholding rises to 22%. Our non-UK resident landlord service covers the scheme.
• Trustees of discretionary trusts holding let property, who face 47%.

Scotland and Wales

The Finance Act 2026 allows the Scottish Parliament and the Senedd to set their own property income rates. We have not seen confirmed rates for 2027/28, so we do not quote any. Scottish and Welsh taxpayers should expect change and revisit their numbers once rates are published. For now, Scottish rental profit is taxed at the Scottish non-savings rates: 19%, 20%, 21%, 42%, 45% and 48%.

Planning before April 2027

The rate change alone seldom justifies a restructure. It does shift the arithmetic on decisions you may already be weighing.

1. Model both years. The ordering rule means two landlords with the same rent can see very different increases.
2. Revisit incorporation. A company does not pay the new rates and deducts interest in full. Whether that beats the capital gains tax, SDLT and refinancing costs depends on the portfolio. See our property portfolio incorporation service.
3. Check who owns what. Where a spouse pays tax at a lower rate, moving beneficial ownership and filing Form 17 within 60 days can move income into their bands.
4. Watch the £100,000 edge. Pension contributions reduce adjusted net income, but relief is limited to relevant UK earnings, and rent does not count as earnings.
5. Time discretionary spending. A planned refurbishment deducted in 2027/28 saves tax at the higher rates, though never delay necessary repairs for that reason.
6. Use losses. Property losses brought forward still reduce future property income, and are worth slightly more.
7. Think about growth. If you plan to buy again, compare personal and company purchases using 2027/28 figures.

Common misunderstandings

• The Section 24 credit does not stay at 20%. It follows the property basic rate, so it becomes 22%.
• A property company will not pay the new income tax rates, because it pays corporation tax.
• "Only 2%" understates the effect, because the ordering rule and Section 24 can move income across bands.
• Making Tax Digital is separate, but landlords with qualifying income above £30,000 in 2025/26 join it in the same month.

Talk to our team

Our specialists review your portfolio under both years' rules and set out the options with the figures attached. Advice is prepared by our specialist team and reviewed by a Chartered Tax Adviser, on fees agreed in advance. The earlier we look, the more choices you keep. To start the conversation, book a call with our team.

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.