The April 2027 change for UK property landlords is an income tax change, not a Capital Gains Tax change. Separate property income tax rates of 22% basic, 42% higher and 47% additional rate will apply to rental profits from 6 April 2027. CGT rates on residential property remain at 18% basic and 24% higher rate, with no legislated change scheduled for April 2027 as of May 2026.
Even so, the 2027 income tax change reshapes the economics behind disposal-timing and incorporation decisions. This page sets out the decision framework. For what's confirmed versus speculated on CGT specifically, see our CGT 2027 changes guide. For depth on the new property income tax rates themselves, see 2027 property income tax rates in detail.
What's actually changing in April 2027
The confirmed change is the new separate property income tax rates announced in the Autumn Budget and scheduled for inclusion in Finance Act 2026:
| Band | General income tax rate | Property income tax rate from 6 April 2027 |
|---|---|---|
| Basic | 20% | 22% |
| Higher | 40% | 42% |
| Additional | 45% | 47% |
These rates apply to net rental profit (after allowable expenses but with Section 24 still operating to restrict relief on finance costs to a basic-rate tax credit). The thresholds at which each band applies follow the general income tax thresholds (£12,570 personal allowance, £50,270 higher rate, £125,140 additional rate), frozen until April 2028.
What is not changing on 6 April 2027 as a confirmed matter:
- CGT rates on residential property (still 18% / 24%)
- CGT annual exempt amount (still £3,000)
- 60-day reporting and payment for UK residential property disposals
- Section 24 mortgage interest restriction (still operating)
- Private Residence Relief, Letting Relief, incorporation relief mechanics
Anyone presenting a fully integrated "2027 property tax package" with confirmed CGT rate changes is overstating the position. Plan against what's legislated, not against the rumour mill.
How the income tax change feeds the CGT calculus
If the CGT rate is unchanged, why does an income tax change matter for the sell-or-hold decision? Because the decision compares two cashflows: (a) the after-tax cost of selling now, which is a one-off CGT charge plus lost future rent; and (b) the after-tax value of continuing to hold, which is the present value of future after-tax rental cashflow plus eventual proceeds at some future CGT cost.
From April 2027 the after-tax cashflow stream from continuing to hold gets smaller, because the income tax bite gets larger. The break-even point between selling now (at locked-in 18% / 24% CGT) and holding (at a 2-percentage-point higher income tax rate on profits) moves marginally in favour of selling. The shift is real, but it is rarely dramatic. The dominant economic levers remain Section 24, financing structure, and capital growth expectations.
A worked example: higher-rate landlord with one property
Consider Maya, a UK-resident higher-rate taxpayer in 2026/27 with a single buy-to-let in Manchester. The property was acquired in 2015 for £180,000 and is currently worth £290,000 (a chargeable gain of around £100,000 after costs). Net annual rental profit (after expenses but before the Section 24 adjustment) is £14,000. Mortgage interest is £6,000 a year.
Maya's pre-tax economics through 2026/27:
- Rental profit (cash-basis): £14,000
- Section 24 effect: the £6,000 finance cost is added back and a 20% tax credit applies (£1,200 reduction to her income tax bill)
- Tax on rental profit at 40%: £5,600, less £1,200 credit = £4,400 effective income tax
- Retained after-tax rental cashflow: £14,000 minus £4,400 = £9,600
From April 2027 the income tax rate on her rental profit increases to 42%:
- Tax on rental profit at 42%: £5,880, less £1,200 credit = £4,680 effective income tax
- Retained after-tax rental cashflow: £14,000 minus £4,680 = £9,320
The annual after-tax cashflow drops by £280, or about 2.9%. Over a 10-year hold, the cumulative loss compared to the pre-April 2027 rate is £2,800 (ignoring time-value).
The CGT cost of selling now: £100,000 gain less £3,000 AEA at 24% = £23,280.
The 2027 change does not flip Maya's decision. The £2,800 of cumulative income tax difference over a decade is small relative to the £23,280 CGT cost. The dominant question is whether Manchester rental yield plus capital growth over 10 years outweighs £23,280 plus reinvestment-yield-on-the-proceeds. The 2027 change tips the marginal calculation but is not the headline driver.
Where the 2027 change does flip decisions: incorporation
The decision the 2027 income tax change actually shifts most often is incorporation. Inside a limited company, rental profits face corporation tax at 19% (small profits rate, profits under £50,000) or 25% (main rate, over £250,000), with marginal relief between. Section 24 does not apply inside a company; finance costs are fully deductible. The 42% personal rate from April 2027 widens the gap meaningfully.
| Position | Personal ownership (HR taxpayer) | Limited company |
|---|---|---|
| Income tax rate on rental profit (from 2027) | 42% (with Section 24 distortion) | 19% / 25% corporation tax |
| Finance cost relief | Basic-rate credit only (Section 24) | Fully deductible |
| Annual exempt amount on gains | £3,000 per individual | None |
| CGT / corporation tax on gains | 18% / 24% | 19% / 25% (no AEA, but indexation removed) |
| Extraction of cash to landlord | Not applicable | Dividend tax 8.75% / 33.75% / 39.35% on extracted profits |
The case for a limited company comes from the income tax saving (large) net of the dividend tax cost on extraction (significant) and the CGT cost of moving the property into the company in the first place (one-off, subject to section 162 incorporation relief in qualifying cases).
For higher-rate landlords with significant mortgage debt and a long hold horizon, the maths after April 2027 often favours company ownership even after accounting for incorporation costs. For lower-leveraged portfolios, basic-rate landlords, or short hold horizons, personal ownership often remains more efficient. We model both routes before any portfolio-level structural change. Detail on the limited company route is in our BTL limited company complete guide.
Section 162 incorporation relief and the CGT cost of incorporating
Transferring property out of personal ownership and into a company is a market-value disposal. CGT crystallises on the gain unless section 162 TCGA 1992 incorporation relief applies. The relief, where available, defers the gain into the base cost of the shares received in the new company. It does not eliminate the gain, but it does push the charge into the future.
Section 162 requires the whole property business to be transferred as a going concern in exchange for shares (not cash or loan notes). Case law on what counts as a "business" for these purposes is well-developed. The Ramsay v HMRC ([2013] UKUT 226) decision set the modern test: the activity must amount to a business, not mere passive investment, with the relevant indicators including time spent on the business, scale, and the nature of the services provided. A single property let on a long-term tenancy with light-touch management is unlikely to qualify; a portfolio with active management often does.
For landlords whose business clearly meets the Ramsay test, the April 2027 income tax change is a strong argument to bring forward the incorporation decision (whilst recognising that doing so before legislation is enacted does carry residual risk if the rates were to be amended in a later fiscal event). For landlords whose business sits in the grey area, the cost of getting the test wrong (CGT crystallises in full, no deferral) is significant, and a settlement check or non-statutory clearance with HMRC may be appropriate before completion.
Disposal timing patterns that often make sense regardless of 2027
Some timing patterns are sensible portfolio practice irrespective of the 2027 change:
- Stagger disposals across tax years. Each tax year carries a fresh £3,000 annual exempt amount. Two disposals in two different tax years use £6,000 of AEA; the same two disposals in one year use £3,000. For portfolio holders, this can be material.
- Use a low-income year to absorb a gain. A landlord stepping down to part-time work, retiring, or taking a gap year can sometimes time a disposal into a year where total income (excluding the gain) sits below the higher-rate threshold, getting some of the gain into the 18% basic-rate CGT band.
- Spousal transfer before sale. Section 58 TCGA 1992 allows transfers between spouses or civil partners on a no-gain-no-loss basis. A pre-disposal transfer to a lower-rate spouse can split the gain across two AEAs and may bring part of it into the basic-rate CGT band. The receiving spouse must have full beneficial ownership before the disposal (so timing, paperwork and stamp duty considerations need to be clean).
- Loss harvesting. Realising a loss on another asset in the same tax year as the property gain reduces the chargeable gain pound for pound. The loss can be brought forward from earlier years.
These patterns are unchanged by the 2027 income tax change. They are worth running through before any sale, in case any of them is available.
Risks and watch-points
Three traps come up repeatedly in disposal-timing decisions:
- Acting on un-legislated speculation. The most expensive mistakes are made by sellers who rushed a disposal to avoid a "confirmed" CGT rise that subsequently did not happen. As of May 2026, no CGT rate change for residential property is legislated for April 2027. Plan against the statute, not the headline.
- Ignoring the 60-day return. Disposal triggers a CGT on UK property return within 60 days of completion (where tax is due). Late filing is a £100 penalty from day 61, escalating quickly. Detail is in our 60-day CGT deadlines page.
- Mis-claiming section 162 incorporation relief. Failing the Ramsay business test (or transferring less than the whole business, or accepting cash consideration that disqualifies the relief) means the deferral is lost and the entire deemed gain crystallises in the year of incorporation. A non-statutory clearance or specialist sign-off before completion is sensible for portfolio incorporations.
How this fits with MTD and the wider 2026/27 compliance picture
From 6 April 2026, sole-trader landlords with rental income above £50,000 are within Making Tax Digital for Income Tax (the threshold drops to £30,000 from April 2027 and £20,000 from April 2028). MTD operates alongside the 2027 income tax rate change: landlords above the threshold file quarterly updates and a year-end finalisation, with rental profits taxed at the new 22/42/47% rates from 2027/28 onwards. The MTD pillar guide is at Making Tax Digital for landlords.
For disposal decisions, the MTD interaction is administrative rather than substantive: the gain on a property disposal sits within the Self Assessment return rather than the MTD quarterly cycle, but the rental profits from the same property up to the date of disposal flow through MTD where the landlord is in scope. Sellers planning a 2027/28 disposal should make sure their MTD set-up captures the relevant period cleanly to avoid reconciliation issues at year-end.
Where to take this from here
The 2027 income tax change is not a CGT change, but it does reshape the maths around disposal timing and incorporation. The defensible approach is to:
- Treat any sell-or-hold decision as a discounted cashflow comparison, with the new 22/42/47% rates plugged in from April 2027
- Run the incorporation calculation in parallel, including the section 162 relief test and the dividend tax cost on extraction
- Stay alert for further fiscal events that could change CGT itself, while not pre-positioning on un-legislated speculation
- Coordinate the disposal with MTD compliance and the 60-day reporting obligation
For modelling on a specific portfolio, the form at the bottom of the page routes through to a property tax specialist who handles the sell-versus-hold-versus-incorporate analysis as part of standard work.