The change in one sentence
From 6 April 2027, the Personal Allowance and other reliefs are applied to non-property, non-savings, non-dividend income first. Only the balance can be used against property, savings or dividend income.
Why it matters now
Until 2027 the order didn't matter, because rent and wages were taxed at the same rates. Once rent is taxed at 24% and wages at 20%, you'd want the allowance to cover the rent. The new rule removes that choice.
What it costs
Salary plus a buy-to-let
Salary £20,000, rental profit £10,000. New rule: £7,430 of salary at 20% (£1,486) plus £10,000 of rent at 24% (£2,400), a total of £3,886. If the allowance could cover the rent first, the total would be £3,486. The rule costs £400 a year.
Small pension plus rent
Pension £8,000, rental profit £15,000. The allowance covers the pension, and £4,570 is left for the rent. £10,430 of rent at 24% is £2,503. With the allowance against rent first, the total would be £2,183, so the rule costs £320.
Who isn't affected
- Landlords whose only income is rent.
- Landlords with income over £125,140, who have no allowance left.
The landlord tax calculator applies the rule automatically.
Sources
- GOV.UK: Income Tax rates and allowances, current and past
- HM Treasury: Budget documents, 28 October 2026
Sources last checked 9 November 2026. See all our sources and how we keep pages up to date.