The Autumn Budget announced separate property income tax rates for UK individual landlords from 6 April 2027: 22% basic rate, 42% higher rate, 47% additional rate. These rates are 2 percentage points above the equivalent general income tax rates and apply to net property rental profit after allowable expenses. The change is scheduled for inclusion in Finance Act 2026.
This page sets out the announced structure and how it interacts with the rest of the landlord tax framework. The position reflects the announcement as of May 2026 and is subject to confirmation in the final form of Finance Act 2026. We update this page after each fiscal event.
The announced rate structure
| Band | Income range (2027/28, on top of personal allowance) | General income tax rate | Property income tax rate |
|---|---|---|---|
| Basic | up to £37,700 of taxable income | 20% | 22% |
| Higher | £37,700 to £112,570 of taxable income | 40% | 42% |
| Additional | above £112,570 of taxable income | 45% | 47% |
The personal allowance remains £12,570 for 2027/28 (frozen until April 2028). The total income thresholds at which each band starts (£50,270, £125,140) are also unchanged from general income tax. Only the percentages applied to property income within those bands are different.
The relative increases are uneven:
- Basic rate: 20% to 22%, a 10% relative increase
- Higher rate: 40% to 42%, a 5% relative increase
- Additional rate: 45% to 47%, a 4.4% relative increase
In absolute pounds, a 2 percentage point increase produces larger tax bills for higher-income landlords (because they have more profit at the affected rate), but the rate change itself is uniform at 2 percentage points across all three bands.
Who is in scope
The new rates apply to UK individual landlords with residential rental income:
- Individual landlords (sole traders), whether single-property or portfolio
- Joint owners, each on their share of the rental profit
- Partners in property partnerships, each on their share of the partnership profit
- Non-UK resident landlords (taxed under the Non-Resident Landlord scheme and ordinary Self Assessment rules)
- Trustees holding residential property for individual beneficiaries (subject to the standard trust tax regime)
The new rates do not apply to:
- Limited companies (corporation tax at 19%/25%, with marginal relief between)
- Commercial property income by individuals (continues under standard income tax rates)
- Property trading or development income by individuals taxed as trading profit (continues under standard income tax rates)
What property income is caught
Residential UK rental income is the core scope. The detail:
- Standard residential buy-to-let: in scope.
- HMOs and multi-let properties: in scope as residential rental.
- Former FHL properties: in scope. The FHL regime was abolished from 6 April 2025, so for 2027/28 onwards these are just residential rental in the new rate regime.
- Serviced accommodation operated as rental rather than trade: in scope. Where the activity meets the trading threshold (hotel-equivalent services, active marketing, short stays at scale), it can be taxed as trading income at standard rates.
- Rent-a-room income above £7,500: the excess is property income (or trading income depending on circumstances) and is in scope when treated as property income.
- Overseas property income: generally treated as property income under the standard rules, but interaction with the new UK-specific rates may produce edge cases. Sense-check before assuming.
Worked examples at common income levels
Example 1: basic-rate sole-trader landlord, no other income
Anita owns three buy-to-let properties producing £28,000 of net rental profit for 2027/28. No other taxable income.
- Personal allowance: £12,570 (deducted from rental profit as her only income)
- Taxable rental profit: £28,000 − £12,570 = £15,430
- Tax at 22%: £3,394.60
For comparison, the same profit in 2026/27 at 20% would produce £3,086.00 of tax. The 2027/28 increase is £308.60.
Example 2: higher-rate landlord with employment income
Daniel earns £55,000 from employment and £24,000 of net rental profit in 2027/28.
- Employment income £55,000: personal allowance £12,570, then £37,700 at 20% = £7,540, then £4,730 at 40% = £1,892. Total employment tax: £9,432.
- Property income £24,000 sits entirely in the higher-rate band (because employment already uses the basic-rate band): £24,000 × 42% = £10,080.
- Combined tax: £19,512.
For comparison, the same position in 2026/27 (with property at the 40% general rate) would have given £24,000 × 40% = £9,600 on the rental income, total £19,032. The 2027/28 increase is £480, or 2% of the higher-rate property profit.
Example 3: portfolio landlord with significant gearing and Section 24
Priya owns five buy-to-let properties producing gross rents of £85,000, allowable non-finance expenses of £15,000, and mortgage interest of £35,000. Her other income (consultancy) is £40,000.
- Taxable rental profit (after non-finance expenses but before Section 24 add-back): £85,000 − £15,000 = £70,000
- Mortgage interest of £35,000 generates a Section 24 basic-rate credit of 20% × £35,000 = £7,000
- Total income: £40,000 + £70,000 = £110,000
- Personal allowance: £12,570 (used against consultancy income first)
- Consultancy tax: (£40,000 − £12,570) at 20% = £5,486
- Property profit allocation: £10,270 in basic-rate band (the remaining slice up to £50,270) at 22% = £2,259, then £59,730 in higher-rate band at 42% = £25,087
- Property tax before credit: £27,346
- Less Section 24 credit: £7,000
- Net property tax: £20,346
- Combined tax: £25,832
For comparison in 2026/27 (property profit at 20%/40% rather than 22%/42%, same Section 24 mechanics): property tax would be £10,270 × 20% + £59,730 × 40% = £2,054 + £23,892 = £25,946 less £7,000 credit = £18,946. Plus consultancy tax £5,486 = £24,432.
The 2027/28 increase for Priya is £1,400, almost all of which is the 2 percentage point property rate uplift on the £70,000 of property profit (£70,000 × 2% = £1,400). The Section 24 mechanics interact unchanged.
Interaction with Section 24
Section 24 restricts relief for residential property finance costs (mortgage interest, loan interest, finance fees, related arrangement costs) for individual landlords to a basic-rate tax credit at 20%. The credit is unchanged by the 2027 rate change.
The 2 percentage point uplift in property income tax rates means the gap between the value of the Section 24 credit (20%) and the effective rate on retained profit widens. A higher-rate landlord now sees a 22 percentage point gap (42% rate minus 20% credit), compared to a 20 percentage point gap in 2026/27. For an additional-rate landlord the gap is 27 percentage points (47% minus 20%).
The economic effect is that the Section 24 friction increases proportionately with the rate change. Leveraged residential landlords feel the change more than ungeared landlords. This is one of the strongest arguments for incorporation for higher-rate landlords with significant mortgage debt.
The limited company alternative
Limited companies are outside the new rates. Corporation tax on rental profit is 19% on augmented profits up to £50,000 (small profits rate), 25% on profits over £250,000 (main rate), with marginal relief between (effective rate rising smoothly from 19% to 25%). Section 24 does not apply: finance costs are fully deductible against trading profit inside the company.
For a higher-rate landlord with significant gearing, the headline rate differential from April 2027 is substantial:
| Position | Personal (2027/28) | Limited company |
|---|---|---|
| Rate on rental profit | 42% (higher), 47% (additional) | 19% (small profits), 25% (main) |
| Mortgage interest relief | Basic-rate credit (20%) only | Fully deductible |
The headline appearance overstates the company advantage, because money inside the company has to be extracted to be useful to the shareholder. Dividend extraction at higher rates (33.75% above the £500 allowance in 2026/27) takes a meaningful slice of the company's profit. The combined effective rate on extracted profit for a higher-rate shareholder is around 46%, modestly above the 42% personal rate, but the comparison is misleading because the personal route applies the 42% to a larger taxable base (because Section 24 disallows the mortgage interest deduction).
For a leveraged property the company route is usually cheaper despite the headline appearance, and the 2027 change strengthens the case. The decision is portfolio-specific. Modelling on the actual portfolio is the only reliable way to decide.
MTD interaction
MTD for Income Tax went live on 6 April 2026 for sole-trader landlords with rental income above £50,000. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. The 2027/28 tax year is therefore the first full year affected by both MTD at the lower £30,000 threshold and the new property income tax rates.
Practical implications:
- In-scope landlords keep digital records and submit quarterly updates through MTD-compliant software.
- The year-end finalisation in MTD applies the new 22/42/47% rates to property income (rather than the standard 20/40/45%).
- Software and accounting bookkeepers need to be set up to apply the right rates to property income from 6 April 2027 onwards.
- Landlords with mixed income (employment and rental) need to ensure software correctly allocates income across the two rate regimes.
Detail on MTD is in our Making Tax Digital for landlords guide.
Planning levers before April 2027
The genuinely useful pre-2027 levers, in roughly decreasing order of typical impact:
- Incorporation review. For higher-rate landlords with significant mortgage debt, the 2027 change strengthens the case for incorporation. The mechanics (CGT on the deemed disposal subject to section 162 incorporation relief, SDLT including the 5% surcharge subject to the partnership route, mortgage refinancing) are substantial undertakings. The 2027 change does not change the answer for a basic-rate ungeared landlord but does shift the break-even for a higher-rate geared landlord.
- Joint-ownership rebalancing between spouses. Where one spouse is a higher-rate taxpayer and the other is not, a Form 17 election on jointly-held property can shift more of the rental profit to the lower-rate spouse. The 2027 rate change widens the saving on this kind of split.
- Bring-forward of allowable expenses. Where commercially sensible, bring forward repairs, professional fees, or other allowable revenue costs into pre-2027/28 years where the relief is at 20%/40% rather than 22%/42%. This is a marginal lever, worth doing where the work was going to happen anyway but not worth manufacturing.
- Mortgage refinancing review. The Section 24 effect widens from April 2027. A landlord paying down mortgage debt reduces Section 24 exposure faster than the rate change widens it. Whether to prioritise mortgage paydown over portfolio growth is a portfolio-specific call.
Speculative pre-emptive disposals or rushed incorporations are usually worse than the additional tax they were intended to avoid. The 2 percentage point uplift is meaningful at the margin but not transformative. Acting against the announced rates by selling profitable property early or restructuring without modelling usually costs more than it saves.
Status check and authoritative sources
This guide reflects the position announced in the Autumn Budget and scheduled for inclusion in Finance Act 2026. Until the Finance Act is enacted in final form, the figures are policy commitment rather than statute. The authoritative confirmation will be the eventual Finance Act 2026 and the corresponding update to HMRC's rates and allowances guidance.
For up-to-date confirmation:
- gov.uk income tax rates and allowances (updated each tax year)
- legislation.gov.uk (for the enacted Finance Act text)
- HMRC Property Income Manual (for operational guidance)
We update this page after each fiscal event. Always confirm rates against the live HMRC pages before making material decisions, particularly in the run-up to 6 April 2027.
What this means in practice
The 2027 property income tax rate change is meaningful for higher-rate geared landlords, modestly significant for higher-rate ungeared landlords, and marginal for basic-rate landlords with small portfolios. The headline rate increase is 2 percentage points across all three bands, but the effect is amplified by the Section 24 mechanics for individual residential landlords with mortgage interest. The right response is to model the actual portfolio against the new rates rather than react to the announcement in isolation, with the limited company route as the natural alternative structure for the landlords most affected.