Landlord tax changes from April 2027: the new property income rates
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From 6 April 2027 (the 2027 to 2028 tax year), property income gets its own Income Tax rates: 22%, 42% and 47% in England and Northern Ireland (Finance Act 2026, section 7). Wales and Scotland set their own property income rates (Finance Act 2026, section 8). That's 2 percentage points above the current main rates on other income. The way the tax is worked out changes too.
General information, not tax advice. For your own position, speak to an accountant or tax adviser.
The new property income rates
| Band | Property income rate, 2027 to 2028 (England and NI) | Rate on other income (current main rates) |
|---|---|---|
| Basic rate | 22% | 20% |
| Higher rate | 42% | 40% |
| Additional rate | 47% | 45% |
Sources: property rates from the GOV.UK policy paper and Finance Act 2026, section 7. Main rates as shown on GOV.UK for 2026 to 2027 (England, Wales and Northern Ireland), checked 18 October 2026.
- Law: Finance Act 2026 says: "For the tax year 2027-28 the property rates of income tax are" 22%, 42% and 47% (legislation.gov.uk). The Act sets these rates for 2027 to 2028.
- Start date: the property rates take effect from 6 April 2027, for the 2027 to 2028 tax year and later years (policy paper).
- Who's affected: the government estimates that by 2029 to 2030, 2.4 million landlords will face an increase in tax as a result (policy paper).
Where the new rates apply: England, Wales, Northern Ireland and Scotland
The UK property income rates of 22%, 42% and 47% apply in England and Northern Ireland (Finance Act 2026, section 7). The power for the Scottish Parliament and the Senedd to set their own property income rates is in force for 2027 to 2028 onwards: Finance Act 2026 section 8 came into force on 16 September 2026, with 2027 to 2028 as the first tax year (Finance Act 2026, section 8; SI 2026/1023).
| Where | Property income rates for 2027 to 2028 |
|---|---|
| England and Northern Ireland | 22% / 42% / 47% |
| Wales | Set by the Senedd (Welsh property rates). Not set yet |
| Scotland | Set by the Scottish Parliament. Not set yet |
If you're a Scottish or Welsh taxpayer, this doesn't mean you're unaffected. Your property income rates are to be set by the Scottish Parliament or the Senedd, and the finance cost relief change below is described in terms of the property basic rate.
How property income will be taxed: the new order
Today, property income is grouped with wages, pensions and trading income as "non-savings, non-dividend" income. From 2027 to 2028, HMRC's technical note says Income Tax will be worked out in this order (technical note):
- income that isn't property, savings or dividend income;
- property income;
- savings income;
- dividend income.
Your personal allowance and other reliefs are set against income that isn't property, savings or dividends first. Only any amount left over is set against property, savings or dividend income.
In plain English: if you have a salary or pension, your personal allowance is used up against that first, and your rental profit sits on top. The remaining income then fills the rate bands in order. The technical note gives these as basic rate (£37,700), higher rate (£87,440) and additional rate (technical note).
HMRC's worked example
This is the example in the annex of HMRC's technical note, reproduced as published (technical note).
Income in the year: employment £30,000; residential letting profit share £3,000; finance costs share £1,000; savings interest £400; dividends £200.
| Step | Calculation | Tax |
|---|---|---|
| Personal allowance set against employment first | £30,000 − £12,570 = £17,430 | |
| Employment income | £17,430 at 20% | £3,486 |
| Property income | £3,000 at 22% | £660 |
| Savings income | £400 at 0% (Personal Savings Allowance) | £0 |
| Dividend income | £200 at 0% (Dividend Allowance) | £0 |
| Total before relief | £4,146 | |
| Finance cost relief (tax reduction) | £1,000 at 22% | −£220 |
| Total Income Tax due | £3,926 |
Illustration (our arithmetic on HMRC's figures, not an HMRC example): at today's 20% rate, the same £3,000 of property income would be taxed at £600, so £60 less. Finance cost relief at 20% would be £200, so £20 less. On these figures, the net difference is £40 more tax.
Mortgage interest (finance cost) relief goes to 22%
Residential landlords still can't deduct finance costs, such as mortgage interest, as an expense. Instead they get a tax reduction. HMRC says this continues, "but this will be at the property basic rate from 2027 to 2028", which is 22% (technical note).
GOV.UK's existing case studies show how the tax reduction is worked out. They use older rates and the current 20% basic rate (GOV.UK).
What isn't changing
HMRC's technical note says (technical note):
- the property allowance is unchanged (GOV.UK currently describes it as your first £1,000 of income from property you rent, unless you're using the Rent a Room Scheme: GOV.UK);
- the Rent a Room Scheme is unchanged;
- carried-forward property losses must still be set against property income;
- the definition of property income is unchanged;
- the National Insurance treatment of property income doesn't change.
Non-resident landlords
The Non-Resident Landlords Scheme currently withholds tax at the basic rate on UK rent paid to landlords outside the UK. After the change, HMRC says the withholding rate will be the property basic rate. The policy paper says secondary legislation "will be amended" to update the rate; we found no regulations made yet as of 18 October 2026 (policy paper). Non-UK landlords can still apply for HMRC authorisation to receive rent gross and file tax returns in the normal way (technical note).
If you're a UK resident with property abroad, that's a different topic. See MTD and foreign property for the MTD side.
Does this change Making Tax Digital?
No. HMRC's technical note says: "These changes do not affect Making Tax Digital for Income Tax" (technical note). The policy paper says there are no changes to reporting requirements: you report and pay through Self Assessment or PAYE as now (policy paper).
MTD thresholds are a separate rule. From 6 April 2027, landlords and sole traders whose qualifying income was over £30,000 in 2025 to 2026 need to use MTD (GOV.UK). Qualifying income is turnover (income before expenses), not profit (GOV.UK). Joint landlords count their share (MTD for jointly owned property).
Check if you need MTD (free, 2 minutes)
More: MTD from April 2027 · MTD for landlords · MTD qualifying income · MTD software for landlords
Savings and dividends
Savings income rates also rise to 22%, 42% and 47% from 2027 to 2028, UK-wide. Dividend rates rose to 10.75% (ordinary) and 35.75% (upper) from 2026 to 2027, with the additional rate unchanged at 39.35% (technical note).
Frequently asked questions
What is the new landlord tax from April 2027?
It isn't a new tax. Property income gets its own Income Tax rates, 22%, 42% and 47%, from the 2027 to 2028 tax year in England and Northern Ireland (Wales and Scotland set their own). The personal allowance is set against other income first (policy paper).
Is rental income taxed at 22% from 2027?
Rental profit that falls in the basic rate band is taxed at the property basic rate of 22% for 2027 to 2028 in England and Northern Ireland (Wales and Scotland set their own). The property higher rate is 42% and the property additional rate 47% (legislation.gov.uk).
Does the change apply in Scotland or Wales?
The UK rates apply in England and Northern Ireland. The Scottish Parliament and the Senedd now have the power to set property income rates for Scottish and Welsh taxpayers from 2027 to 2028 (Finance Act 2026, section 8; SI 2026/1023). Neither had published its rates as of 18 October 2026.
Does mortgage interest relief change?
It's still a tax reduction rather than an expense, but from 2027 to 2028 it's worked out at the property basic rate of 22% (technical note).
Do I still get the personal allowance against rental income?
Yes, but it's set against your other income, such as wages or pension, first. Only any allowance left over is set against property, savings or dividend income (technical note).
Does this affect landlords who own through a limited company?
The new property rates are Income Tax rates for individuals, trusts and estates, so rental profit taxed inside a company isn't charged at them (policy paper). If you take money out as dividends, dividend rates rose to 10.75% (ordinary) and 35.75% (upper) from 6 April 2026 (Finance Act 2026, section 4). HMRC's technical note says the charge on companies under the loans to participators regime "will also increase to 35.75%" (technical note). Ask an accountant how this applies to your company.
Does this change Making Tax Digital?
No. HMRC says the changes don't affect MTD for Income Tax (technical note). MTD depends on your qualifying income: see MTD from April 2027.
Sources {#sources}
All checked 18 October 2026.
- GOV.UK policy paper: Income Tax: changes to tax rates for property, savings and dividend income (27 Nov 2025)
- GOV.UK: Change to tax rates for property, savings and dividend income: technical note (26 Nov 2025)
- legislation.gov.uk: Finance Act 2026, section 7
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Tax relief for residential landlords: how it's worked out
- GOV.UK: Find out if and when you need to use MTD for Income Tax
- GOV.UK: Work out your qualifying income for MTD for Income Tax
Related: Landlord compliance checklist · MTD for Income Tax guide
Last checked against GOV.UK and legislation.gov.uk on 18 October 2026. Not tax advice.
Sources
- legislation.gov.uk: 8
- legislation.gov.uk: Made
- legislation.gov.uk: 4
- GOV.UK: Income tax changes to tax rates for property savings and dividend income
- GOV.UK: Change to tax rates for property savings and dividend income technical note
- legislation.gov.uk: 7
- GOV.UK: Income tax rates
- GOV.UK: Changes to tax relief for residential landlords how its worked out including case studies
- GOV.UK: Find out if and when you need to use Making Tax Digital for Income Tax
- GOV.UK: Work out your qualifying income for Making Tax Digital for Income Tax
Facts last checked: 18 October 2026.