April 2027: Every Landlord's Tax Rate Is Going Up. Here Is What You Need to Know.

From 6 April 2027, every individual landlord in England, Wales and Northern Ireland will pay income tax on their rental profits at rates two percentage points higher than today.

This is not a proposal or a consultation. The Finance Act 2026 received Royal Assent on 18 March 2026. The rates are fixed: 22% basic, 42% higher, 47% additional. If you hold buy-to-let property personally and pay the higher rate, your income tax bill on rental profits will rise.

What Is Changing

Before April 2027, rental profits are taxed at the same rates as employment and trading income. If you are a higher-rate taxpayer, rent and salary sit in the same tax calculation at 40%.

From 6 April 2027, property income has its own separate rates:

Tax band	Rate before April 2027	Rate from April 2027
Basic	20%	22%
Higher	40%	42%
Additional	45%	47%

These are the first separate property income tax rates in UK tax history. Prior to this, rental profits sat in the standard income tax calculation alongside employment and trading income. From April 2027, property income is calculated separately, after employment and trading income but before savings and dividend income.

The change was announced by Chancellor Rachel Reeves at the Budget on 26 November 2025 and is now law.

Source: GOV.UK, income-tax-changes-to-tax-rates-for-property-savings-and-dividend-income; Finance Act 2026 [verified June 2026]

Why the Government Is Doing This

The stated rationale, as set out on GOV.UK, is the National Insurance gap.

Employees pay National Insurance on wages. The self-employed pay NI on trading profits. Landlords pay no National Insurance on rental income. Adding two percentage points to each property income tax band is the government's mechanism for narrowing the effective tax difference between earned income and rental income.

The Office for Budget Responsibility estimated that the combined changes to property, savings, and dividend income rates will raise over £2.3 billion annually by 2030-31.

Source: GOV.UK Budget 2025 OOTLAR [verified June 2026]

Who Is Affected

HMRC estimates approximately 2.4 million landlords will face a higher tax bill as a result of this change.

The new rates apply to:

• Individual landlords holding residential property in their own name in England, Wales and Northern Ireland
• Partnership landlords, where each partner is taxed individually on their share of profits
• Landlords with a combination of employment income and rental income

Scotland is not covered. The Scottish Parliament sets its own income tax rates via the Scottish Budget, and no Scottish equivalent change has been announced as of June 2026.

Limited company landlords are not affected. See below.

Source: GOV.UK technical note on property income tax rates [verified June 2026]

Personal Allowance and Thresholds: What Does Not Change

The personal allowance remains at £12,570. The basic rate limit stays at £37,700 and the higher rate threshold at £50,270. All are frozen until at least 5 April 2031.

What does change from April 2027 is the order in which HMRC applies the personal allowance. Under the new rules, the allowance is applied against employment, trading or pension income first. Any remaining allowance then absorbs property income.

For most landlords with a salary at or above £12,570, the allowance is already fully absorbed by employment income and the ordering change makes no practical difference. For landlords whose earned income is below £12,570, the result is that more rental income sits outside the allowance and is taxed at the new property rate sooner.

Source: GOV.UK technical note; GOV.UK, maintaining income tax thresholds until 5 April 2031 [verified June 2026]

Section 24: The Credit Also Rises, But the Gap Stays

The Section 24 finance cost credit currently stands at 20% and will also increase from April 2027, rising to 22% to match the new property basic rate.

For basic-rate taxpayers, this broadly maintains the existing position. A 22% rate on property income, offset by a 22% credit on finance costs, leaves the net effect roughly unchanged.

For higher-rate taxpayers, it is a different story. The rate goes from 40% to 42%. The credit goes from 20% to 22%. The relief gap stays at 20 percentage points. Both numbers shift by the same amount, so the structural disadvantage is unchanged. The absolute tax cost, however, increases because 42% is applied to the same gross taxable income figure before the credit.

To make this concrete, take a property generating £18,000 per year in rent, with £12,000 in mortgage interest and £2,000 in other expenses:

Currently (higher-rate taxpayer):

• Taxable profit under Section 24: £16,000
• Tax at 40%: £6,400
• Less 20% credit on £12,000 finance costs: £2,400
• Net tax: £4,000

From April 2027:

• Taxable profit: still £16,000
• Tax at 42%: £6,720
• Less 22% credit on £12,000 finance costs: £2,640
• Net tax: £4,080

The annual increase on this single property is £80. Across a larger portfolio, it compounds.

For a full guide to how Section 24 works, including worked examples at both basic and higher rates, see our article on Section 24: The Tax Rule That Is Costing Landlords Thousands.

Source: GOV.UK technical note on property income tax rates [verified June 2026]

The Straightforward Arithmetic

Outside the Section 24 interaction, the impact is simple: two more percentage points on your taxable property profit.

A higher-rate taxpayer with £10,000 of annual taxable property profit (after all allowable expenses):

• Currently: 40% on £10,000 = £4,000
• From April 2027: 42% on £10,000 = £4,200
• Annual increase: £200

At £50,000 of taxable profit, the increase is £1,000 per year. At £100,000, it is £2,000.

For a landlord with ten properties each producing £10,000 in taxable profit, the combined annual increase is £2,000 from April 2027 onwards. The rate is the same whatever the portfolio size. What scales is the base it applies to.

Limited Company Landlords Are Not Affected

The April 2027 rate increase applies only to individuals. A landlord holding property through a limited company is not subject to the new property income rates.

Companies continue to deduct mortgage interest and other finance costs as business expenses before calculating taxable profit. Section 24 does not apply to companies. Corporation tax is charged at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between those thresholds.

The practical gap between personal ownership and limited company structures widens further from April 2027. A higher-rate taxpayer owning property personally will pay 42% on net property profit. A company with the same underlying profit would pay 19% or 25% in corporation tax, having already deducted finance costs in full.

Incorporation is not automatically the right move. Transferring existing properties into a company triggers SDLT at market value and potentially CGT on any embedded gain. Transfer costs can easily run to tens of thousands of pounds before professional fees, and it may take many years for the annual tax saving to recover them. Whether incorporation makes sense depends entirely on your individual position, the size of any gain, the mortgage situation, and your plans for the portfolio.

A specialist property accountant can model the full numbers. That advice is not optional before making any structural change.

For a detailed look at the incorporation question, see our guide: Should I Incorporate My Buy-to-Let?

Source: GOV.UK corporation tax rates guidance [verified June 2026]

What to Do Before April 2027

The change is confirmed. These are the steps worth taking now.

Understand your current liability. Know what your taxable property profit looks like today, including the Section 24 position on any mortgaged properties. If you are not sure how to calculate it, our landlord self-assessment walkthrough covers the full process with a worked example.

Model the April 2027 impact. Use the RealYield calculator to run your portfolio at the new rates. For properties that are generating modest after-tax returns, the additional two percentage points may change the cashflow picture meaningfully. Better to know this now than when the January 2028 tax bill arrives.

Review your portfolio structure. If you are a higher-rate taxpayer holding multiple properties personally, the April 2027 change makes the comparison with a limited company structure more worth considering. Speak to a specialist property accountant. That is not a recommendation to incorporate. It is a recommendation to get a clear view of your options before the rates take effect.

Do not leave this until the last moment. Decisions about portfolio structure, refinancing, or property disposals take time to plan and execute. If the April 2027 change shifts the economics of your portfolio, the time to model it is now.

This article is for informational purposes only and does not constitute financial or investment advice. Tax rules and legislation change frequently. Always verify current rates with HMRC or GOV.UK and seek independent professional advice before making investment decisions.