Property Investment Tax UK: Complete Guide 2026/27

Property investment runs through four tax moments, and most landlords meet them in order: you pay tax when you buy, while you hold and let, when you sell, and again when you pass property on. Wrapped around those four moments are two decisions that shape every figure: how you hold the property (personally or through a company) and how you report it as Making Tax Digital is phased in.

This guide is the map. Each stage below gives you the headline rules and the current 2026/27 figures, then points you to the in-depth guide that covers the mechanics. It is written for individual landlords and portfolio investors across the UK, and it reflects the law as it stands for 2026/27 plus the enacted changes that take effect from 6 April 2027.

The property tax lifecycle at a glance

The table below maps each stage to its main tax, the headline 2026/27 figure, what changes next, and the specialist guide that goes deeper. Devolved purchase taxes (Scotland and Wales) are noted under the buying section.

Stage	Main tax	Headline 2026/27 figure	What changes	Deep guide
Buy	Stamp Duty Land Tax	Standard bands plus 5% additional-dwellings surcharge	Devolved equivalents in Scotland and Wales	SDLT buy-to-let surcharge guide
Hold and let	Income tax on rental profit	20% / 40% / 45%	22% / 42% / 47% from 6 April 2027 (England, Wales, NI)	Tax on rental income
Section 24	Finance-cost restriction	20% basic-rate credit on interest	Reducer rises to 22% from 2027/28	Section 24 guide
Sell	Capital gains tax	18% / 24%, £3,000 annual exemption	60-day reporting where tax is due	CGT on property
Pass on	Inheritance tax	40% above the £325,000 nil-rate band	Pensions enter the estate from April 2027	IHT on rental property
Structure	Corporation tax (companies)	19% to £50k, 25% above £250k	Second layer on profit extraction	Buy-to-let limited company
Comply	Making Tax Digital	£50,000 threshold from April 2026	£30,000 (2027), £20,000 (2028)	MTD for property income

Buy: Stamp Duty Land Tax and the 5% surcharge

The first tax most investors meet is on purchase. In England and Northern Ireland this is Stamp Duty Land Tax (SDLT). On top of the standard residential bands that apply from 1 April 2025, second and investment properties attract a 5% additional-dwellings surcharge, which has applied to transactions on or after 31 October 2024 under the Finance (No.2) Act 2024. The surcharge is added to every band, so on a typical buy-to-let it is a significant share of the total bill.

Two further points matter for investors. A 2% non-resident surcharge applies on top of the standard rates where the buyer is not UK resident. And Multiple Dwellings Relief was abolished from 1 June 2024, so the old portfolio-relief route is gone, although the non-residential rates can still apply to a single transaction involving six or more dwellings. First-time-buyer relief (nil to £300,000, then 5% to £500,000) is not available where the surcharge applies.

Purchase tax is devolved outside England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax through Revenue Scotland, with an Additional Dwelling Supplement of 8% on second properties. Wales charges Land Transaction Tax through the Welsh Revenue Authority, with its own higher rates for additional properties. The bands and reliefs differ in each jurisdiction, so use the figures for the country where the property sits. The statutory basis for SDLT is the Finance Act 2003, and HMRC's current bands are on the gov.uk SDLT pages. The full purchase mechanics, including the surcharge bands and the mitigation routes that survive, are in our SDLT buy-to-let surcharge guide.

Hold and let: income tax on rental profit

While you let a property, you are taxed on your rental profit, which is rental income minus allowable expenses. For an individual landlord this profit is added to your other income and taxed at your marginal rate.

For 2026/27 the rates are 20% basic, 40% higher and 45% additional. From 6 April 2027, property income is taxed at separate property rates of 22% basic, 42% higher and 47% additional in England, Wales and Northern Ireland (Scotland is excluded). This is enacted law: the Finance Act 2026 sets the new rates at sections 6 and 7, and section 7 confirms the 22/42/47 figures for 2027/28. It is not a proposal or a draft, so it should be planned for now rather than treated as speculative.

Worked example 1 (the April 2027 step-up). A higher-rate landlord receives £18,000 of rent and has £4,000 of allowable expenses (excluding mortgage interest, which is dealt with separately under Section 24). Their rental profit is £14,000. In 2026/27 the tax on that profit is 40%, or £5,600. In 2027/28, on the same figures, the higher property rate of 42% applies, giving £5,880. The 2 percentage point rise adds £280 of tax on this profit, and the gap scales with profit. A landlord at the top of the higher-rate band should also watch the £100,000 personal-allowance taper, where allowances are withdrawn and create an effective 60% band on income between £100,000 and £125,140.

For the full mechanics of taxing rental income, see how much tax you pay on rental income and the year-by-year detail in our income tax rates for landlords 2026/27 guide and the 2027 property income tax rates guide.

Section 24: the finance-cost restriction

For individual landlords, mortgage and finance interest is not a deductible expense. Instead, you receive a basic-rate tax credit on it (a reducer applied after your tax is calculated). For 2026/27 the credit is 20% of the lower of your finance costs, your residential rental profit, or your income above the personal allowance.

Worked example 2 (Section 24). A higher-rate landlord pays £10,000 of mortgage interest in 2026/27. Before Section 24, deducting that interest as an expense would have saved tax at 40%, worth £4,000. Under Section 24, the landlord instead receives a 20% credit, worth £2,000. The difference of £2,000 is the extra tax burden the restriction creates on this interest. The effect falls hardest on heavily geared higher and additional-rate landlords.

From 2027/28 the reducer rises to 22% in step with the new property basic rate, under Schedule 1 of the Finance Act 2026 (which amends the individual reducer at ITTOIA 2005 section 274AA, with the partnership equivalent at ITA 2007 section 399B). This matters: because the credit tracks the 22% property basic rate, a basic-rate landlord sees no new wedge open. Higher and additional-rate landlords see the credit rise from 20% to 22%, a small improvement, but it stays well below their 42% and 47% rates, so the finance-cost gap remains broadly the same as today rather than widening. Section 24 does not apply to companies, which is one of the drivers of the incorporation question below. The detail, including the three-part cap and carry-forward of unused credit, is in our Section 24 complete guide and the applied walkthrough in claiming mortgage interest relief under Section 24.

Allowable expenses and capital allowances

Getting the expense side right is where most of the routine tax saving lives. You can deduct revenue costs incurred wholly and exclusively for the letting, including:

• Property management fees, letting agent commissions and management charges
• Repairs and maintenance that restore the property, not improvements that enhance it
• Insurance, buildings and contents premiums
• Professional fees, accountancy and certain legal costs
• Utilities and council tax where you pay them between tenancies
• Advertising to find tenants, and travel for genuine management visits

Capital improvements such as a new extension or a first central-heating system are not deductible against rental income. They add to your base cost and reduce capital gains tax when you sell, so they are not lost, just deferred to the disposal calculation. The boundary between a repair and an improvement is the single most common area of error, and HMRC's Property Income Manual sets out the tests in detail.

Capital allowances are mostly a footnote for residential buy-to-let. The dwelling-house bar in the Capital Allowances Act 2001 means you cannot claim plant-and-machinery allowances on items inside a let dwelling, although common parts and integral features in non-dwelling areas can qualify. Where allowances do apply, the main-pool writing-down allowance is now 14% (reduced from 18% by the Finance Act 2026), and a new 40% first-year allowance is available to unincorporated landlords on qualifying new plant from 1 January 2026. The full deductions checklist is in our landlord tax deductions list.

Structure: personal ownership versus a limited company

How you hold property is the decision that changes everything downstream. Held personally, rental profit is taxed at your income tax rates and Section 24 restricts your interest relief. Held through a limited company, the company deducts mortgage interest in full (no Section 24) and pays corporation tax: 19% on profits up to £50,000, 25% on profits above £250,000, and an effective 26.5% on the slice between (via marginal relief).

The catch is the second layer of tax. Money inside the company is not yours until you extract it, and extracting profit as dividends is taxed again in your hands (the dividend ordinary and upper rates were raised from 6 April 2026 (ordinary 10.75%, upper 35.75%), with the additional rate unchanged at 39.35%). Transferring an existing portfolio into a company can also trigger SDLT and CGT on the way in. The table below summarises the trade-off.

Feature	Personal ownership	Limited company
Tax on profit	Income tax 20/40/45% (22/42/47% from 2027/28)	Corporation tax 19% to 25%
Mortgage interest	Basic-rate credit only (Section 24)	Fully deductible
Extracting profit	Already yours after tax	Second tax layer on dividends or salary
Transferring existing portfolio in	Not applicable	Possible SDLT and CGT charges
Reporting	Self Assessment, then MTD as phased in	Company accounts and CT return; outside MTD ITSA

Worked example 3 (personal versus company). Take a higher-rate landlord with £30,000 of rental profit and £10,000 of mortgage interest. Held personally, the £30,000 profit is taxed at 40% (£12,000) and the £10,000 interest gives only a £2,000 credit, a combined cost of £10,000. Held in a company, the interest is fully deductible, so taxable profit is £20,000, corporation tax at the small profits rate is £3,800, and the after-tax cash sits in the company. If the landlord then draws the cash as dividends, the second layer of tax applies and narrows the gap. The lesson is that incorporation can help leveraged higher-rate landlords, but the answer is specific to your numbers and your plans, not a universal yes. We do not recommend one route over the other here. Model it with our buy-to-let limited company guide and tax-efficient structure guide.

Sell: capital gains tax on disposal

When you sell, you pay capital gains tax on the gain (sale proceeds minus base cost, capital improvements and costs of buying and selling). For UK residential property the rates are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, in force from 30 October 2024. The CGT rate sits at section 1H of the Taxation of Chargeable Gains Act 1992, and the current figures are confirmed on the gov.uk CGT rates page.

Each individual has a £3,000 annual exempt amount for 2026/27. Where tax is due on a UK residential disposal, you must report and pay within 60 days of completion through a UK property return, separately from your Self Assessment. Transfers between spouses and civil partners are on a no-gain, no-loss basis, which lets couples use both annual exemptions and split the gain across rate bands. Business asset disposal relief does not apply to ordinary investment property. For the full disposal mechanics, see our CGT on property complete guide, the rates detail in CGT rates for property 2026/27, and the deadline detail in CGT payment deadlines.

Pass on: inheritance tax

Rental property forms part of your estate, so it is exposed to inheritance tax. IHT is charged at 40% on the value of the estate above the available nil-rate band of £325,000 (frozen to 5 April 2031), with the residence nil-rate band of £175,000 potentially adding to that where a home passes to direct descendants (the residence band tapers away above a £2m estate). The statutory rate and bands are in the Inheritance Tax Act 1984, and HMRC's overview is on the gov.uk inheritance tax pages.

The key trap for landlords is that standard buy-to-let does not qualify for business property relief. Letting is treated as an investment activity, not a trade, so the property is taxed in full at 40% rather than benefiting from relief. From 6 April 2027, unused defined-contribution pension funds also fall within the IHT estate, which matters for landlords whose wealth is split between property and pensions. The spouse exemption and transferable nil-rate bands remain important planning tools. The detail is in our inheritance tax on rental property guide.

Comply: Making Tax Digital for Income Tax

Making Tax Digital for Income Tax changes how landlords report, and it is being phased in by qualifying income. It applies from 6 April 2026 where your combined self-employment and property income is above £50,000, from 6 April 2027 above £30,000, and from 6 April 2028 above £20,000. HMRC's eligibility tool is on the gov.uk MTD pages.

Once you are in, you must keep digital records, send quarterly updates of income and expenses, and submit a final declaration in place of the old Self Assessment return, all through compatible software. Joint owners test their own share of gross income, so co-owners may enter MTD at different times. Companies are outside MTD for Income Tax (they have their own corporation tax regime). The practical readiness steps are in our Making Tax Digital for property income guide.

Planning across the lifecycle

The value in tax planning comes from looking across the whole lifecycle rather than at one stage in isolation. A few themes recur:

• Timing disposals. Spreading a sale, or completing in different tax years, can use more than one annual exempt amount and keep part of a gain in the basic-rate CGT band.
• Spousal ownership splits. Placing income with the lower-rate partner and using both annual exemptions on a future sale can be efficient, supported by a Form 17 declaration where shares are unequal.
• Sequencing structure changes. The cost of moving a portfolio into a company (SDLT and CGT on entry) has to be weighed against the ongoing saving, which depends on leverage and extraction plans.
• Pensions and IHT. With unused pensions entering the estate from 2027, the interaction between property wealth and pension wealth becomes a live planning point.

Getting specialist support

Property tax rules are dense and they keep moving: the April 2027 property rates, the Section 24 reducer rising to 22%, and the rolling Making Tax Digital deadlines all land within the next two years. A specialist property accountant can help you sequence the buy, hold, sell and pass-on decisions across the portfolio lifecycle and keep your reporting compliant as the rules change. Use the buttons on this page to start a conversation about your portfolio.