The property income tax rates April 2027 will introduce separate income tax rates for property income from 6 April 2027. For the 2027/28 tax year, the property basic rate will be 22%, the higher rate 42% and the additional rate 47%. These changes could increase individual landlords’ tax bills, making it important to understand how rental profits will be taxed alongside other income and what steps can be taken before the new rules begin.
The government announced these changes at Budget 2025. Its official publication on changes to tax rates for property, savings and dividend income sets out the policy, while the accompanying technical note on changes to property, savings and dividend income tax rates explains how the revised calculation and income-ordering rules will operate.
The impact will depend on each landlord’s total taxable income, the proportion of rental profits falling into each tax band, and any applicable allowances, reliefs or carried-forward losses. Understanding these rules before the changes take effect can help landlords forecast their liabilities and review their property finances.
The following table compares the current rates with those scheduled to apply from 6 April 2027.
The new property rates apply to taxable property income for 2027/28 and subsequent tax years, subject to the applicable rules and any devolved arrangements. Employment income, pension income and trading profits remain subject to their respective income tax rates.
Property income generally includes taxable profits from letting land or buildings in the UK or overseas, where the income falls within the UK Income Tax rules. It can also include certain property income distributions from investment funds.
The changes are relevant to individuals who receive taxable rental profits, including landlords who own buy-to-let properties personally and individuals receiving profits from property partnerships. Certain trusts and estates will also be affected under their applicable rules.
The property allowance and the Rent a Room Scheme will remain unchanged under the announced measures. Carried-forward property losses must continue to be set against property income in accordance with the existing rules.
Limited companies are treated differently. A company letting property generally pays corporation tax on its taxable profits, so the new individual property income tax rates do not apply directly to those profits. Separate considerations may arise when money is distributed to shareholders.
The property income tax rise 2027 is particularly relevant to landlords who have taxable rental profits alongside other income. This includes people who receive a salary or pension, earn self-employment income, hold savings or receive dividends.
Landlords with substantial residential mortgage borrowing should also review their position because the tax reduction for eligible finance costs will change to 22%.
The actual impact will depend on how much taxable income falls within each property rate band. A landlord whose rental profits fall entirely within the basic-rate band will have a different calculation from someone whose profits extend into the higher or additional-rate bands.
Consider a landlord with £28,000 of taxable rental profit, where the entire amount falls within the property basic-rate band after accounting for other income, allowances and reliefs.
At the current 20% rate, the tax attributable to those profits is:
£28,000 × 20% = £5,600
At the new 22% property basic rate, the calculation becomes:
£28,000 × 22% = £6,160
The additional tax is:
£6,160 − £5,600 = £560 per year
This illustrates the effect of the two-percentage-point increase when the full amount is taxed at the basic rate. It is not a universal calculation for every landlord with £28,000 of rental profit, because other income and allowances may change the applicable bands.
Now consider a landlord with £60,000 of taxable rental profit, where the entire amount falls within the property higher-rate band.
At the current 40% rate:
£60,000 × 40% = £24,000
At the new 42% property higher rate:
£60,000 × 42% = £25,200
£25,200 − £24,000 = £1,200 per year
This calculation assumes that all £60,000 falls within the higher-rate band. Where rental profits span multiple bands, each portion must be taxed at its applicable rate.
Reviewing the landlord tax rates for 2027/28 alongside your other taxable income can help you estimate your liability before April 2027.
From 2027/28, the Income Tax calculation will assess income in the following order:
The ordering determines how much of each rate band remains available for rental profits after other income has been considered.
General allowances and reliefs that can be applied to income outside property, savings and dividends must be used against that other income first. If an allowance or relief exceeds the relevant income, the remaining amount can then be allocated to property, savings or dividend income according to the applicable rules.
Once allowances and reliefs have been applied, taxable income is allocated to the relevant rate bands. The amount of basic-rate band available for property income depends on how much has already been used by other taxable income.
Suppose a landlord receives £35,000 in employment income and £20,000 in taxable rental profit. For illustration, assume the landlord is entitled to the full £12,570 personal allowance, has no pension contributions or other reliefs, and has no savings or dividend income.
First, the personal allowance is applied to employment income:
£35,000 − £12,570 = £22,430 taxable employment income.
The remaining basic-rate band is:
£37,700 − £22,430 = £15,270.
The rental profit is therefore divided between the remaining basic-rate band and the higher-rate band.
Under the new rates:
Total tax attributable to the rental profit is £5,346.
Under the corresponding current rates, the calculation would be:
Total tax attributable to the rental profit would be £4,946, giving an increase of £400 per year.
This example demonstrates why applying one rate to the entire rental profit can produce an inaccurate result. Actual calculations may also need to account for other income, reliefs, losses and residential finance costs.
Individual landlords with residential lettings generally cannot deduct mortgage interest and other qualifying residential finance costs as ordinary expenses when calculating their taxable property profits. Instead, eligible landlords may receive a tax reduction based on qualifying finance costs.
From 6 April 2027, this reduction will be calculated at the property basic rate of 22%, subject to the existing restrictions.
For example, if a landlord has £8,000 of qualifying residential finance costs and sufficient income tax liability, the potential tax reduction is:
£8,000 × 22% = £1,760
The final relief may be restricted by property business profits, the amount of tax due and the treatment of finance costs carried forward from earlier years. This change does not make mortgage interest fully deductible as a business expense.
Landlords should therefore consider both the increased tax on rental profits and the revised finance-cost relief when estimating their overall liability.
The change may be particularly significant for landlords who:
The property income tax UK rules will require landlords to assess their overall taxable income and the amount falling into each band. Landlords with low profits or substantial allowable losses may experience a different outcome from those with higher taxable rental income.
The announced 22%, 42% and 47% property rates are intended to apply in England, Wales and Northern Ireland. However, the government has stated that it will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income tax rates in line with their existing powers.
Landlords in Scotland and Wales should therefore check the relevant final budget announcements and commencement arrangements before completing their 2027/28 tax forecasts. They should not assume that the headline rates will necessarily apply unchanged in every devolved tax jurisdiction.
Landlords can use the months before the new tax year to assess their likely liability and prepare for the changes.
Review rent received and allowable expenses, including eligible repairs, insurance, letting-agent charges and other property running costs. Accurate calculations will help identify the taxable profit attributable to each property and the overall portfolio.
Prepare a forecast covering employment earnings, pension income, trading profits, rental profits, savings interest and dividends. This will help establish which property tax bands may apply and whether some rental income is likely to be taxed at a higher rate.
Calculate the expected tax reduction for eligible residential finance costs at 22% and compare it with the additional tax on rental profits. Consider how the change may affect cash available for mortgage payments, repairs, refinancing and other property expenses.
Property losses carried forward can continue to reduce future taxable property income under the normal rules. Keep records of previous losses and confirm how much remains available to offset against future profits.
Some landlords may consider transferring properties into a company or changing joint ownership arrangements. These decisions can have significant consequences, including Capital Gains Tax, Stamp Duty Land Tax, mortgage terms, legal expenses and ongoing compliance obligations.
Before making a decision, review the wider implications. Our guidance on capital gains tax for landlords explains considerations relevant to property disposals, while our capital gains tax services provide further information about tax support for property transactions.
Retain rental statements, invoices, bank records, mortgage statements, expense records and calculations of carried-forward losses. Good record-keeping supports accurate tax returns and makes it easier to forecast liabilities under the revised rules.
The introduction of separate property rates makes accurate tax forecasting more important, particularly for landlords with multiple properties or several sources of income.
A tax adviser can review the full income position, assess the effect of allowances and reliefs, calculate the allocation of rental profits across the new rate bands and help prepare realistic cash-flow forecasts. Advice can also help landlords assess proposed disposals or ownership changes before making financial commitments.
Apex Accountants offers support with personal tax planning, rental income reporting and related compliance requirements. Explore our personal tax services to discuss your circumstances and prepare for the changes.
From 6 April 2027, the new property income tax rates will be 22%, 42% and 47% for the basic, higher and additional bands, respectively, subject to the applicable jurisdictional arrangements. The increase could mean £560 more tax on £28,000 of rental profits taxed entirely at the basic rate or £1,200 more on £60,000 taxed entirely at the higher rate.
However, the actual liability depends on how income is ordered, how allowances and reliefs are allocated, which rate bands are available and whether the landlord qualifies for finance-cost relief or has losses to carry forward.
Reviewing rental profits, other income, mortgage costs and ownership plans ahead of April 2027 can help landlords understand the likely impact and make informed decisions about their property investments.
6 April 2027. From the 2027/28 tax year, rental income is taxed using separate property income tax rates – 22% basic, 42% higher, 47% additional – each 2 percentage points above the equivalent main rates.
It depends on your band. A basic-rate landlord pays 2p more per £1 of rental profit within the basic band – about £560 a year on £28,000 of profit – while a higher-rate landlord pays 2p more per £1 within the higher band. The calculation also moves to a separate property income basis, so the exact effect depends on your other income.
No – the change applies to individual landlords’ income tax. Companies continue to pay corporation tax on rental profits, which is why the company-versus-personal structure question is now a live planning point for larger portfolios.
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