What Are the Major UK Landlord Tax Changes for 2026 and 2027?

Two consecutive tax years bring the biggest shift in landlord taxation for a generation. The 2026/27 year makes Making Tax Digital for Income Tax mandatory for most landlords, and the 2027/28 year introduces separate, higher property income tax rates. Both changes are now law. Finance Act 2026 received Royal Assent on 18 March 2026, so the 2027 rates are no longer a proposal you can plan around as if they might not happen.

This page is a hub. It explains every confirmed change in plain English, gives you a key-dates table and an action point for each one, and links through to the detailed guide for the changes that need a deeper read. If you only have a minute, jump to the key dates table near the end.

Making Tax Digital for Income Tax from April 2026

The most immediate change is Making Tax Digital (MTD) for Income Tax becoming mandatory from 6 April 2026. It applies to sole-trader landlords and self-employed individuals whose qualifying income is above £50,000. The threshold then drops to £30,000 from 6 April 2027 and £20,000 from 6 April 2028.

Qualifying income is the figure that catches people out. It is your gross self-employment turnover plus your gross property rental income, measured before any deductions. A landlord with £52,000 of rent and £40,000 of allowable costs (a net profit of only £12,000) is still in scope at the April 2026 mandate, because the test is on the £52,000 gross figure. Where a property is jointly owned, each owner tests the threshold against their share of the gross rent, not the property's total, so the default 50/50 split between spouses halves the figure each person measures.

Under MTD you must keep digital records using HMRC-recognised compatible software, submit a quarterly update for each quarter, and then complete the year-end process. That year-end step is the part most often misunderstood. There is no separate mid-year filing: the End-of-Period Statement and the Final Declaration are both due by 31 January following the end of the tax year, and together they replace the old Self Assessment return. The Final Declaration is where you confirm the year's figures and claim reliefs.

The quarterly deadlines are commonly stated incorrectly. Under the standard UK tax-year quarters the four updates are due on 7 August, 7 November, 7 February and 7 May, each one a month after the quarter it covers. (An optional calendar-quarter election is available from 6 April 2026, but the default is the tax-year quarter cycle.)

Penalties also work differently from how they are often described. Late submission is points-based: one point per missed quarterly update, with a single £200 fixed penalty triggered only when you reach the 4-point threshold, not £200 every quarter. Points reset after 24 months of full compliance. Late payment is charged on a separate, accelerated schedule for MTD filers: 3% of the unpaid tax from day 15, a further 3% from day 30, then 10% per year from day 31.

Action point. If your gross rental income is anywhere near £50,000, assume you are in scope and choose compatible software now, then digitise your records ahead of 6 April 2026. The detail, including the qualifying-income test and the software list, is in our MTD for landlords deadline guide.

Getting MTD-ready: the practical sequence

Most landlords who run into trouble do so because they wait until the first quarterly deadline approaches before setting anything up. The work is straightforward if you do it in order before the tax year starts:

1. Confirm scope. Add gross self-employment turnover and gross rent (your share, if jointly owned). Over £50,000 means you are in from April 2026.
2. Pick recognised software. Choose from HMRC's compatible list and connect it to your HMRC account ahead of 6 April 2026.
3. Move records into the software. Stop relying on a shoebox or a year-end spreadsheet. Capture rent and costs digitally from the first day of the new tax year.
4. Set the quarterly rhythm. Diarise 7 August, 7 November, 7 February and 7 May, and decide whether to use the optional calendar-quarter election.
5. Plan the year-end. The End-of-Period Statement and Final Declaration replace the old return and are both due by 31 January after the tax year ends.

Property Income Tax Rates from 2027 and Section 24

The bigger structural change arrives a year later. From the 2027/28 tax year, property income in England, Wales and Northern Ireland is taxed at its own set of rates, separate from the rates on employment, pension and other income (only Scotland is carved out):

• Property basic rate: 22% (compared with the 20% general basic rate)
• Property higher rate: 42% (compared with 40%)
• Property additional rate: 47% (compared with 45%)

These are enacted, not proposed. They were announced at the Autumn Budget 2025 (26 November 2025) and written into law by Finance Act 2026 section 7, which received Royal Assent on 18 March 2026. The rates apply to property income in England, Wales and Northern Ireland; only Scotland is carved out, so Scottish taxpayers pay the Scottish income tax rates set by the Scottish Parliament on their property income. Finance Act 2026 section 8 and Schedule 2 contain a future enabling power for Wales and Scotland to set their own property income tax rates for a later year, but it is not in force for 2027/28, so a landlord with property across borders only needs to single out any property taxed under the Scottish rates. Our 2027 property income tax rates guide walks through the mechanics, and the 2026/27 income tax rates explainer covers the year that still uses the standard 20/40/45 rates.

Section 24 continues alongside this. The Section 24 finance-cost restriction means mortgage interest and other finance costs are not deducted from rental profit. Instead, you receive a tax reducer (a credit) against your overall income tax bill. For 2026/27 that reducer is given at 20%.

Here is the point that most commentary still gets wrong. The reducer does not stay frozen at 20% after the rate change. From 2027/28 it rises to the new property basic rate of 22%. Finance Act 2026 Schedule 1 amends the relief provisions in ITTOIA 2005 (ss.274AA and 274C) and ITA 2007 (s.399B), substituting "property basic rate" for "basic rate" in the calculation, so the reducer tracks the 22% rate automatically. The practical consequences are clearer than the headlines suggest:

• Basic-rate landlords: the reducer (22%) matches the rate on their property income (22%), so no new wedge opens. Their position does not worsen because of this change.
• Higher and additional-rate landlords: the reducer rises from 20% to 22%, a small improvement, but it still sits well below their 42% or 47% rate. The finance-cost wedge remains 20 percentage points for higher-rate and 25 points for additional-rate landlords, the same gap as before. It does not widen.

So the real story for geared higher-rate landlords is the rate rise from 40% to 42% (and 45% to 47%) on the profit itself, not a worsening of the interest restriction.

A Section 24 worked example for a higher-rate landlord

Numbers make this concrete. Take a higher-rate landlord with £30,000 of gross rent, £6,000 of allowable running costs (insurance, agent fees, repairs) and £12,000 of mortgage interest. Section 24 strips the interest out of the profit calculation and hands back a tax reducer instead. The table compares the same landlord in 2026/27 (40% rate, 20% reducer) and 2027/28 (42% property rate, 22% reducer).

Step	2026/27 (40% / 20% reducer)	2027/28 (42% / 22% reducer)
Gross rent	£30,000	£30,000
Less allowable running costs	(£6,000)	(£6,000)
Taxable property profit (interest not deducted)	£24,000	£24,000
Tax on profit at the property rate	£9,600	£10,080
Less finance-cost reducer (20% then 22% of £12,000)	(£2,400)	(£2,640)
Income tax on the rental income	£7,200	£7,440

Two things stand out. The interest is never deducted from profit, so the landlord is taxed on £24,000 even though their economic margin after interest is only £12,000. And the £240 increase between the two years comes from the rate moving to 42% on the profit, partly offset by the reducer rising to 22%. The reducer keeping step with the property basic rate is exactly why no new basic-rate wedge opens for landlords below the higher-rate threshold. If the same landlord remained inside the basic-rate band, the 22% charge on the profit and the 22% reducer on the interest would cancel on the geared portion entirely.

Capital Gains Tax on Property in 2026/27

Capital Gains Tax (CGT) on residential property is unchanged for 2026/27. The rates are 18% for gains that fall within your remaining basic-rate band and 24% for gains above it. These figures have applied since 30 October 2024, when the previous 18%/28% rates were aligned downward at the higher end. Trustees and personal representatives pay 24% throughout.

The annual exempt amount stays at £3,000 per person for 2026/27, down from £6,000 and, before that, £12,300. That low allowance means most property disposals now produce a CGT liability. Where tax is due, a UK resident must report the gain and pay within 60 days of completion through HMRC's UK property service. Non-UK residents must file the 60-day return for every UK land disposal, whether or not tax is due.

Action point. Model the gain, your band position and any spouse-transfer or main-residence relief before you list a property, because the 60-day clock starts at completion. The full picture is in our capital gains tax on property guide.

Stamp Duty Land Tax: the 5% Additional-Dwellings Surcharge

The Stamp Duty Land Tax (SDLT) surcharge for additional residential properties is 5% for transactions on or after 31 October 2024, raised from the previous 3% by Finance (No.2) Act 2024 (the surcharge sits in Schedule 4ZA of the Finance Act 2003). It applies to second homes, buy-to-let purchases, and purchases by companies, and it is charged on top of the standard residential SDLT bands. You can confirm the current bands on the gov.uk SDLT residential rates page.

SDLT is an England and Northern Ireland tax. Scotland charges Land and Buildings Transaction Tax (LBTT) with an 8% Additional Dwelling Supplement, and Wales charges Land Transaction Tax (LTT) with its own higher rates for additional properties, so the surcharge figure is not the same across the UK. Where you have paid the surcharge on a property that replaces a former main residence, a refund may be available within the statutory window: see our SDLT surcharge refund guide.

What Landlords Can Still Deduct

None of the 2026 and 2027 changes touch the ordinary deduction rules for running costs, and it is worth restating what survives because the Section 24 noise leads some landlords to assume more has been taken away than actually has. Revenue costs incurred wholly and exclusively for the letting are still deducted from rental profit: letting agent and management fees, repairs and maintenance (as distinct from improvements, which are capital), buildings and contents insurance, ground rent and service charges, accountancy and professional fees, advertising for tenants, and the replacement of domestic items relief for furnishings in a let property. Landlord insurance is fully tax deductible as a running cost. The single exception is finance costs. Mortgage interest, arrangement fees and the interest element of any borrowing are removed from the profit calculation by Section 24 and replaced with the tax reducer described above.

The line between repairs and improvements is where landlords most often get the deduction wrong. Replacing a worn-out boiler like for like is a deductible repair; upgrading a single-glazed window to double glazing where that is now the standard equivalent is generally a repair too, but adding an extension or converting a loft is capital and goes against the eventual CGT computation instead. If you are unsure, the safer assumption is to treat genuine betterment as capital.

Operating Through a Limited Company

For landlords already holding property in a limited company, corporation tax for 2026/27 is unchanged: a 19% small-profits rate up to £50,000 of profit, a 25% main rate above £250,000, and marginal relief tapering the effective rate between those two figures. Companies are outside MTD for Income Tax entirely and continue to file an annual CT600. Companies also deduct mortgage interest in full before corporation tax, so the Section 24 restriction does not apply to them.

The enacted 2027 rates change the comparison for individuals. Once property income is taxed at 42% or 47% in personal hands while corporation tax stays at 19% to 25%, holding property through a company looks more attractive on the headline rate for geared higher-rate landlords. The catch is the second layer of tax. A company pays corporation tax on its profit, and you then pay dividend tax personally when you draw that profit out (after the £500 dividend allowance, at 8.75%, 33.75% or 39.35%). So the company route favours landlords who reinvest rather than draw, while a higher-rate landlord who needs the income to live on may find the combined charge closer to personal ownership than the headline corporation tax rate suggests. The table sets out the structural differences that matter most after 2027.

Feature	Personal ownership (from 2027/28)	Limited company
Tax on rental profit	22% / 42% / 47% property income rates	19% to 25% corporation tax
Mortgage interest	Restricted by Section 24 (22% reducer)	Deducted in full before tax
Tax to extract profit	None (profit is already personal)	Dividend tax on top when drawn
Making Tax Digital	In scope above the income threshold	Outside MTD for Income Tax
Cost to move existing property in	Not applicable	Potential CGT and SDLT on transfer
Ongoing compliance	Self Assessment / MTD	CT600, accounts and confirmation statement

The decision is not automatic. Incorporating an existing portfolio can crystallise CGT and SDLT, and extracting profit from the company is itself taxed. The right structure depends on whether you intend to draw the income now or build a portfolio over time. Our 2027 property income tax rates guide models the personal-rate side of that comparison in more depth.

Abolished and Reformed Regimes: FHL and Renters' Rights

The Furnished Holiday Lettings (FHL) regime was abolished from 6 April 2025. Properties that used to qualify as FHL are now taxed as standard residential lets. That means Section 24 applies to their finance costs, and the old FHL advantages have gone: capital allowances on furniture and equipment, Business Asset Disposal Relief on sale, and the treatment of profits as relevant earnings for pension contributions. Transitional rules preserve pooled capital allowances brought forward and ring-fence former-FHL losses against future profits of the new residential business, but for ongoing operation the property is now ordinary residential.

Separately, the Renters' Rights Act 2025 (2025 c. 26) reforms the private rented sector. The abolition of Section 21 'no-fault' evictions, and the move to reformed Section 8 grounds for possession, comes into force on 1 May 2026 (appointed by SI 2026/421). This is not itself a tax change. Its relevance to your tax position is indirect but real: possession timing affects when you can sell a property with vacant possession, and that in turn drives the timing of a CGT disposal. Our Section 21 abolition guide sets out the new possession landscape.

Key Dates and Action Points

The changes above, condensed into a single table. For every dated deadline across the tax year, not just the changes, see the full landlord tax calendar 2026/27.

Date	What changes	What to do
6 April 2025	FHL regime abolished (former holiday lets now standard residential)	Confirm preserved capital allowances and ring-fenced losses are carried into the new residential business
1 May 2026	Section 21 'no-fault' evictions abolished (SI 2026/421)	Review possession plans; factor vacant-possession timing into any planned sale
6 April 2026	MTD for Income Tax mandatory above £50,000 qualifying income	Choose compatible software and digitise records before the year starts
7 August 2026	First MTD quarterly update due (quarter to 5 July 2026)	Submit the quarter through compatible software
6 April 2027	Property income rates of 22/42/47 take effect (England, Wales and NI; Scotland sets its own); MTD threshold drops to £30,000	Review your structure and marginal rate ahead of the rate change
6 April 2028	MTD threshold drops to £20,000	Smaller landlords prepare for MTD in this final phase

Planning Ahead

The combination of digital compliance from 2026 and separate, higher property income rates from 2027 is the largest change to landlord taxation in decades. The good news is that none of it is uncertain any more: both changes are enacted, the dates are fixed, and you can plan against known law rather than speculation.

The practical priorities are getting MTD-ready in time, understanding how the 2027 rates and the Section 24 reducer interact for your marginal rate, and reviewing whether your current ownership structure still fits the post-2027 position. A specialist property accountant can keep you compliant through the MTD transition and model the rate change against your actual numbers. To talk it through, explore our property tax services or get in touch using the form on this page.