Individual landlords face a further two-point increase from April 2027, taking the total rise announced over two Budgets to four percentage points across every property-income tax band.
The government has announced that Income Tax rates on property income will rise to 24 per cent, 44 per cent and 49 per cent from 6 April 2027. The change is one of the most direct landlord measures in the Budget delivered on 28 October.
It is a further increase rather than an entirely new tax. Budget 2025 had already introduced separate property-income rates of 22 per cent, 42 per cent and 47 per cent for 2027-28. Budget 2026 adds another two percentage points to each rate before those separate rates take effect.
The current position has not changed immediately. Property income remains charged at the main Income Tax rates of 20 per cent, 40 per cent and 45 per cent during 2026-27. The new figures are due to apply from the start of the 2027-28 tax year and must be enacted through the Finance Bill 2026-27.
The increase applies to taxable property income
The new percentages apply to taxable property income, not to gross rent collected from tenants. A landlord first calculates rental profit under the tax rules, taking account of allowable expenses, losses and any relevant allowances or reliefs. The applicable rate then depends on the landlord’s overall taxable income and the band into which the property income falls.
A simple example shows the scale of the change. If £10,000 of taxable property profit falls wholly within one band, the tax would be £2,400 at the new basic property rate, £4,400 at the higher rate or £4,900 at the additional rate. Compared with today’s 20, 40 and 45 per cent rates, that is £400 more in each case. The latest Budget accounts for £200 of that increase; the other £200 was announced in 2025.
Those figures are illustrations only. They do not include the Personal Allowance, losses, the property allowance, other income or the special treatment of residential finance costs. Individual residential landlords generally receive a tax reduction for qualifying finance costs rather than deducting mortgage interest in full when calculating rental profit, so the effective result can differ considerably between portfolios.
Individual and company landlords are treated differently
The property rates are Income Tax rates and therefore primarily affect individuals receiving property income, including landlords who own rentals personally. They do not directly replace Corporation Tax for a limited company that owns and lets property.
The Budget tables retain the Corporation Tax main rate at 25 per cent and the small-profits rate at 19 per cent. That does not mean incorporation automatically produces a lower overall bill. A company has its own rules and costs, and a shareholder may face further tax when profits are extracted. Transferring an existing property can also create tax, finance and legal consequences.
Ownership structure therefore matters, but the Budget announcement is not a reason to make a hurried transfer. The relevant comparison depends on borrowing, profit levels, plans for retained income, future sales and the landlord’s wider tax position.
The territorial position needs care
The Treasury says the announced property rates will apply across England, Wales and Northern Ireland. It has also provided Scotland and Wales with the ability to set property-income rates in line with their existing Income Tax powers. The final position for taxpayers affected by devolved arrangements may therefore require further decisions and legislation.
Landlords with properties or tax residence across more than one UK nation should not assume that the location of the rental property alone decides every part of the calculation. The detailed Finance Bill provisions and subsequent HM Revenue and Customs guidance will be important before the 2027-28 rules begin.
Why the announcement matters for the rental market
For landlords operating in their own names, the measure reduces the amount of post-tax profit available from a given level of taxable rental income. The effect will be greater in cash terms for larger profitable portfolios and can combine with mortgage costs, maintenance, insurance, licensing and periods without rent.
For tenants, the announcement creates no direct tax charge and does not authorise an automatic rent increase. Some landlords may review rents, investment or property sales, but the outcome will depend on local demand, tenancy rules, affordability and each landlord’s finances. Claims that the measure will produce one uniform market response would therefore be speculation rather than a confirmed effect.
The confirmed development is narrower but still significant: from April 2027, the government intends taxable property income to be charged four percentage points above today’s main Income Tax rates. Landlords have time to understand the effect, but decisions should be based on the enacted Finance Bill and individual professional advice rather than the Budget headline alone.
NetRent does not provide legal advice. This article represents our understanding of rental property law and is provided for general information only. Landlords should obtain independent legal or professional advice where appropriate.
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