What is changing
At the moment rental profit is added to your other income and taxed at the same 20%, 40% and 45% rates. From April 2027 the government is splitting property income off into its own set of rates and raising them. HMRC's policy paper, published on 29 October 2026, says the property basic, higher and additional rates become 24%, 44% and 49% from April 2027, and the rate for property income of trusts is 49%.
| Band | Rental profit today (2026/27) | Previous plan for 2027/28 | From April 2027 (Budget 2026) |
|---|---|---|---|
| Basic | 20% | 22% | 24% |
| Higher | 40% | 42% | 44% |
| Additional | 45% | 47% | 49% |
What doesn't change: the personal allowance (£12,570), the width of the basic rate band (£37,700 of taxable income) and the rates on your other income. Profit is still rent less allowable expenses, you still report it on your Self Assessment return, and the changes don't add any new reporting. HMRC expects around 5% of taxpayers to pay more in 2027/28, by an average of £225.
The rates are announced but still need to pass into law: HMRC says legislation will be introduced in the Finance Bill 2026-27.
Who it applies to
- Individuals and partnerships with rental profit in England, Wales and Northern Ireland. Trustees and personal representatives are covered too.
- Scotland: HMRC says the Scottish and Welsh governments have been given the ability to set property income rates under their income tax powers. We haven't seen a Scottish property rate published, so Scottish landlords should check GOV.UK.
- Limited companies pay Corporation Tax on their profits, not Income Tax, so these are not the rates that apply to a company's rental profit.
What it costs, in pounds
If all your rental profit stays inside one tax band, the extra tax is simply the rate rise multiplied by the profit. These figures ignore the mortgage interest credit and any move into a higher band.
| Rental profit | Extra a year vs today (+4 points) | Extra vs the previous plan (+2 points) |
|---|---|---|
| £5,000 | £200 | £100 |
| £10,000 | £400 | £200 |
| £20,000 | £800 | £400 |
| £30,000 | £1,200 | £600 |
If part of your profit sits in a higher band, the maths gets more mixed, because the higher rate is 44% on that slice. The landlord tax calculator works it out from your own figures.
A worked example, step by step
A landlord in England has a £42,000 salary, £15,600 of rent, £2,400 of running costs and £6,000 of mortgage interest. Their rental profit is £15,600 − £2,400 = £13,200. We compare 2026/27 with 2027/28.
Step 1: the salary
After the £12,570 personal allowance, £29,430 of salary is taxed at 20%, which is £5,886. That stays the same in both years.
Step 2: the rental profit in 2027/28
| Basic rate band left after the salary: £37,700 − £29,430 | £8,270 |
| £8,270 of profit at 24% | £1,984.80 |
| The other £4,930 of profit at 44% | £2,169.20 |
| Tax on the rental profit | £4,154.00 |
| Less the mortgage interest credit: 24% × £6,000 | −£1,440.00 |
| Extra tax caused by the rent | £2,714 |
2027/28 (new rates)
£2,714£288 more, even with the bigger creditWhat landlords can do
- Work out your own figure now. Switch the calculator to 2027/28 and compare it with 2026/27, so there are no surprises on the January 2029 bill.
- Set money aside each month. The calculator shows the monthly amount.
- Claim everything you're entitled to. Every allowable expense lowers the profit the higher rates apply to. See allowable expenses for landlords, and note that the new England landlord register fee is described by GOV.UK as tax-deductible.
- Check where your profit falls. A profit that straddles a band edge is taxed at the higher 44% rate above it, so small changes in rent or costs can matter.
- Ask an accountant about your own position. Whether to change how you own property is a big decision with its own taxes and costs, so it needs proper advice.
Common questions
Is this definitely happening?
It was announced in the Budget on 28 October 2026 and HMRC says legislation will be introduced in the Finance Bill 2026-27. Until it passes, the details could change, so check GOV.UK.
When do I pay the higher tax?
The rates apply to profit in the 2027/28 tax year, which starts on 6 April 2027. You report it on your Self Assessment return after the year ends, and HMRC says it will be collected through existing Self Assessment or PAYE channels.
Does it change my other income?
No. Your salary, pension and other income stay at 20%, 40% and 45%. Only property income gets the new rates. Savings income also moves to 24%, 44% and 49% from April 2027 across the UK, according to the same HMRC paper.
Why is the rise 4 points in some places and 2 in others?
The Budget added 2 percentage points to the rates that were already planned for 2027/28 (22%, 42% and 47%). Those planned rates were themselves 2 points above today's 20%, 40% and 45%, so the total rise from today is 4.
Does it affect Making Tax Digital?
Not directly. The tax rates and the reporting rules are separate. See the Making Tax Digital guide for when quarterly updates start.