How we got here
For decades, rental profit was taxed exactly like a salary. The November 2025 Budget broke that link. It announced separate rates for property and savings income, two points above the main rates from April 2027, and these were legislated in the Finance Act 2026.
On 28 October 2026 the Chancellor's first Budget went further. Property and savings income will be taxed four points above the main rates. Dividend rates stay at 10.75%, 35.75% and 39.35%. The rates on wages, National Insurance, VAT and corporation tax didn't change. Landlords therefore face the largest rise of any income type in 2027/28.
The rates side by side
| Band (taxable income) | Wages and pensions | Property income 2026/27 | Property income 2027/28 |
|---|---|---|---|
| Basic (up to £37,700 above the allowance) | 20% | 20% | 24% |
| Higher (to £125,140) | 40% | 40% | 44% |
| Additional (over £125,140) | 45% | 45% | 49% |
| Section 24 credit | – | 20% | 24% |
Who it affects
Individuals with rental profit from UK or overseas property, including joint owners. It doesn't apply to:
- limited companies, which pay corporation tax;
- Scottish taxpayers in the same way, because Scotland sets its own rates;
- income covered by Rent a Room relief (£7,500) or the £1,000 property allowance.
The Finance Act 2026 lets the Senedd set Welsh property rates. Unless it chooses differently, Welsh landlords pay the same rates as England.
Worked examples for 2027/28
Basic-rate landlord with a pension
Pension £20,000, rental profit £10,000, no mortgage. The allowance goes against the pension. All the rental profit is taxed at 24%, which is £2,400. That's up £400 from £2,000 in 2026/27.
Higher-rate employee with a mortgage
Salary £60,000, rental profit £20,000, interest £9,000. £20,000 × 44% = £8,800, minus a £2,160 credit, gives £6,640. In 2026/27 it's £6,200 (£8,000 − £1,800). The increase is £440.
Rent is the only income
Rental profit £30,000. The allowance still covers £12,570. The remaining £17,430 is taxed at 24% (£4,183) instead of 20% (£3,486), which is £697 more.
Try your own figures in the landlord tax calculator.
What to think about before April 2027
- Timing of repairs. Genuine repairs paid before 6 April 2027 count against 2026/27 profit at today's rates. See allowable expenses.
- Pension contributions extend your basic rate band and reduce adjusted net income. That can keep rental profit out of the 44% band and protect your Personal Allowance.
- Ownership between spouses. If one of you pays a lower rate, unequal ownership with Form 17 may help. Read our joint ownership guide.
- Incorporation costs Stamp Duty, Capital Gains Tax and refinancing, which often outweigh the saving for small portfolios. Get advice first.
Frequently asked questions
When do the new property tax rates start?
On 6 April 2027, the start of the 2027/28 tax year. The first return affected is for 2027/28, due by 31 January 2029. Payments on account may rise sooner.
Are the rates 22% or 24%?
24%, 44% and 49%. The 22%/42%/47% rates were announced in the 2025 Budget and replaced by the Budget of 28 October 2026.
Do the new rates apply to commercial property?
Yes. They apply to all property income of individuals, residential and commercial. Section 24 only restricts finance costs on residential lets.
Sources
- GOV.UK: Income Tax rates and allowances, current and past
- HM Treasury: Budget documents, 28 October 2026
- GOV.UK: Tax relief for residential landlords, how it's worked out
- GOV.UK: Work out your rental income when you let property
Sources last checked 9 November 2026. See all our sources and how we keep pages up to date.