Property income tax rates 2027: 24%, 44% and 49% explained, with worked examples

Alessio Scannicchio

Oct 30

9 min read

General information, not financial, tax or legal advice. Speak to a qualified tax adviser about your own position. Checked against GOV.UK, HMRC, HM Treasury, the OBR and legislation.gov.uk on 30 October 2026.

If you let out property, the Budget on 28 October probably left you with one question: what does this mean for the rent I actually keep? You may well have been doing the sums on the back of an envelope since. The headline: income tax on rental profits is set to rise by a further 2 percentage points from 6 April 2027. If Parliament passes the change, the new property rates will be 24% (basic), 44% (higher) and 49% (additional).

But the details matter more than the headline. This guide to the landlord tax changes for 2027 covers the timeline, mortgage interest relief and three worked examples in pounds and pence.

Landlord tax increase 2027: what is changing and when

Until now, rental profits have been taxed at the same rates as wages: 20%, 40% and 45%. Budget 2025 created separate "property rates" from April 2027. Budget 2026 has raised them again.

Tax year	Property basic rate	Property higher rate	Property additional rate	Status
2026-27 (now to 5 April 2027)	20%	40%	45%	Current law. Property income is taxed at the main rates.
2027-28, as the law stands today	22%	42%	47%	Set by Finance Act 2026, section 7 (the Budget 2025 rise).
2027-28 onwards, as announced at Budget 2026	24%	44%	49%	Still needs Finance Bill 2026-27 to become law.

In plain English: whichever band you're in, the announced rates mean £40 more tax on every £1,000 of rental profit compared with today. Under the law as it stands, it would be £20.

The 49% rate also applies as the new property trust rate for trustees. Rates on wages and pensions stay at 20%, 40% and 45%, and dividend rates don't change. Savings income rises by the same 2 points to 24%, 44% and 49%.

The bands themselves aren't changing. In both 2026-27 and 2027-28 the Personal Allowance is £12,570 and the basic rate band is £37,700. The Personal Allowance still tapers away above £100,000. The Office for Budget Responsibility says personal tax thresholds are frozen until April 2031.

So what? Nothing changes this tax year. The rise starts in 2027-28, and half of it isn't law yet.

What counts as property income

Finance Act 2026 defines property income mainly as the profits of a UK or overseas property business. It also covers smaller items such as post-cessation receipts and rent from electric-line wayleaves.

Some things stay the same:

Profits, not rent. The rate applies to your profit after allowable expenses, worked out as now.
The £1,000 property allowance. HMRC says that if your annual gross property income is £1,000 or less, you will not need to tell HMRC, unless you cannot use the allowances. The Budget didn't change this allowance. (It did raise the separate trading allowance to £3,000, which isn't for property income.)
Who pays them. These are income tax rates for individuals, partnerships and trusts, not corporation tax rates for companies.

So what? If you own rental property in your own name, these rates apply to you, and they bite on profit, not rent.

Property income tax rates 2027-28 and your other income

From 2027-28, property income gets its own place in the order HMRC uses to work out your tax. Wages, pensions and trading profits fill your tax bands first. Property income comes next, then savings and dividends. Your allowances are also used against your other income first.

So what? Which of the rental income tax rates for 2027-28 you pay depends on your other income. If you have a salary, your rental profit sits on top of it.

Finance cost relief for landlords: Section 24 and mortgage interest

Under the rules introduced by section 24 of the Finance (No. 2) Act 2015, often called "Section 24", individual landlords of residential property haven't been able to deduct mortgage interest and other finance costs from rental income since 2020-21. Instead you get a tax reduction. HMRC's guidance says the reduction is the basic rate value of the lowest of three amounts:

your finance costs for the year, plus any brought forward;
your property business profits; and
your adjusted total income above the Personal Allowance.

If the reduction is capped by the second or third amount, the unused finance costs are carried forward to later years.

What happens from April 2027? Finance Act 2026 changes the law so the reduction is worked out at the "property basic rate" rather than the basic rate. HM Treasury's Budget 2026 policy costings say "finance cost relief will continue to be aligned to the property basic rate". The official documents we read don't print a separate figure for the relief. It follows the property basic rate, so:

2026-27: 20%;
2027-28 under current law: 22%;
2027-28 if Finance Bill 2026-27 passes as announced: 24%.

Higher and additional rate landlords still only get relief at that property basic rate, not at 44% or 49%.

So what? The relief rises with the basic rate, which softens the increase if you have a mortgage. It never matches the higher or additional rate.

Worked examples

Illustrative example, not a forecast, not tax advice. Made-up, rounded figures. Each landlord lives in England, owns one residential let personally and has only a salary besides. All the profit falls in one band and the finance costs are fully usable. We've assumed the Personal Allowance (£12,570) and basic rate band (£37,700) stay as published for 2027-28.

All three landlords receive £15,000 rent a year and pay £3,000 of allowable expenses (not counting mortgage interest), leaving £12,000 of property profit.

Example 1: basic rate landlord, salary £35,000, mortgage interest £5,000.
Example 2: higher rate landlord, salary £70,000, mortgage interest £5,000.
Example 3: basic rate landlord, salary £35,000, no mortgage.

Example	Tax year and rates	Tax on £12,000 profit	Finance cost reduction	Tax due on the rental profit
1. Basic rate, £5,000 interest	2026-27 (20%)	£2,400	£1,000 (20% of £5,000)	£1,400
1. Basic rate, £5,000 interest	2027-28, current law (22%)	£2,640	£1,100 (22% of £5,000)	£1,540
1. Basic rate, £5,000 interest	2027-28, Budget 2026 (24%)	£2,880	£1,200 (24% of £5,000)	£1,680
2. Higher rate, £5,000 interest	2026-27 (40%)	£4,800	£1,000 (20% of £5,000)	£3,800
2. Higher rate, £5,000 interest	2027-28, current law (42%)	£5,040	£1,100 (22% of £5,000)	£3,940
2. Higher rate, £5,000 interest	2027-28, Budget 2026 (44%)	£5,280	£1,200 (24% of £5,000)	£4,080
3. Basic rate, no mortgage	2026-27 (20%)	£2,400	£0	£2,400
3. Basic rate, no mortgage	2027-28, current law (22%)	£2,640	£0	£2,640
3. Basic rate, no mortgage	2027-28, Budget 2026 (24%)	£2,880	£0	£2,880

What the examples show. Comparing 2026-27 with 2027-28 as announced:

Landlords 1 and 2 each pay £280 more a year, roughly £23 a month. The tax on profit rises by £480 (4 points on £12,000), but their finance cost reduction rises by £200 (4 points on £5,000).
Landlord 3 has no finance costs, so the full £480 rise applies. That's £40 a month.
The Budget 2026 change on its own, compared with the 22/42/47 rates already in law, accounts for £140 of the rise for landlords 1 and 2 (about £12 a month) and £240 for landlord 3 (£20 a month).

Results differ if your profit spans two bands, your finance costs are capped, you have losses, you own jointly, or you live in Scotland or Wales.

So what? Here the basic and higher rate landlords see the same cash rise, because both pay 4 points more on profit and get 4 points more relief. Your own figures will differ.

Scotland, Wales and Northern Ireland

For individuals, the 24%, 44% and 49% rates apply in England, Wales and Northern Ireland. The governments of Scotland and Wales have been given powers to set their own property income rates, in line with their existing income tax powers.

So what? If you're a Scottish or Welsh taxpayer, watch for announcements from your own government before assuming these figures apply to you.

What HMRC and the OBR say about the impact

HMRC's impact note, published on 29 October 2026, estimates that:

around 5% of taxpayers will see an average tax rise of £225 in 2027-28 because of the higher property rates (about £19 a month); and
by 2031-32, 2.4 million landlords will face changes in tax.

The government expects the Budget 2026 property rise to raise £35 million in 2027-28, £575 million in 2028-29, and £435 million to £455 million a year after that.

The Office for Budget Responsibility said the two increases "represent a material reduction in returns to private landlords". It added that these and earlier measures "collectively risk leading to a steady rise in rents". The Budget document says 84% of taxpayers are unaffected by the property and savings changes in 2027-28.

So what? Most taxpayers won't notice this change. Landlords will.

What is law and what is not yet

Law now: separate property rates from 6 April 2027 at 22%, 42% and 47%, and the link between finance cost relief and the property basic rate (Finance Act 2026).
Announced, not yet law: the further rise to 24%, 44% and 49%, which the government will legislate in Finance Bill 2026-27.
Not changed: the Personal Allowance, the income tax bands, the £1,000 property allowance, and the way finance cost relief is calculated.

What to do now

None of this needs action today. The new rates don't start until 6 April 2027, and half of the rise still isn't law. A few practical steps will help you see where you stand:

Check which band your rental profit falls in. Add it to your other income and compare the total with the £12,570 Personal Allowance and the £37,700 basic rate band. If it straddles two bands, the examples above won't match yours.
Gather your 2026-27 figures. Rent received, allowable expenses, and mortgage interest and other finance costs. Note any finance costs carried forward from earlier years too.
Watch for Finance Bill 2026-27. Until it passes, 22%, 42% and 47% are the law for 2027-28. The GOV.UK sources below are the place to check.
Speak to a qualified tax adviser about your own position before you make any decisions.

Other landlord rules are changing too. See our Renters' Rights Act guide for landlords. If you let an HMO, see our guide to Article 4 directions and HMOs. For homes left empty, see our guide to empty dwelling management orders.

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FAQ

How much tax do landlords pay on rental income in the UK? Individual landlords pay income tax on their rental profit, not the gross rent, at the rate for the band the profit falls in. In 2026-27 that is 20%, 40% or 45%. From 6 April 2027 the property rates in law are 22%, 42% and 47%, and Budget 2026 announced 24%, 44% and 49% for England, Wales and Northern Ireland, subject to Finance Bill 2026-27.

Will landlords be taxed more from 2027? Individuals, partnerships and trustees with property income face higher rates from 6 April 2027. The first 2 point rise is already law, and the further 2 points still need Finance Bill 2026-27. HMRC estimates that around 5% of taxpayers will see an average tax rise of £225 in 2027-28 from the higher property rates.

Are rental properties taxed differently? From 2027-28, yes. Property income gets its own rates and is taxed after earnings and pensions but before savings and dividends. In 2026-27 it is still taxed at the same rates as wages. Companies pay corporation tax, not these income tax rates.

Do landlords get mortgage interest relief? Individual landlords of residential property cannot deduct mortgage interest. Instead they get a tax reduction at the property basic rate: 20% in 2026-27, 22% for 2027-28 under current law, and 24% if the Budget 2026 change is enacted. This applies whatever band the rental profit falls in.

What are the property income tax rates in Scotland? The 24%, 44% and 49% rates apply to individuals in England, Wales and Northern Ireland. HMRC says the governments of Scotland and Wales can set their own property income rates under their existing income tax powers. Scottish and Welsh taxpayers should check announcements from their own government.

How is landlord tax calculated? Take rental income, deduct allowable expenses (not mortgage interest) to get the property profit, and add it to your other income. Tax the profit at the property rate for the band it falls in, then deduct the finance cost reduction. If gross property income is £1,000 or less, the property allowance may mean you do not need to tell HMRC.

General information, not financial, tax or legal advice. Speak to a qualified tax adviser about your own position.

Sources

All accessed 30 October 2026.