Quick Answer: From 6 April 2027, rental profits in England, Wales and Northern Ireland will be taxed at 22%, 42% and 47%. That is two percentage points above the rates paid on wages. The government landlord tax hikes fall hardest on landlords who own in their own name, and forecasters expect tenants to feel some of it.
- Property income will have its own rates from 6 April 2027: 22%, 42% and 47%.
- Dividend rates already rose to 10.75% and 35.75% in April 2026.
- Thresholds stay frozen until 2031-32, dragging more landlords upwards.
- Analysts put the effect at £20 to £25 a month on typical English rents.
- A rumoured National Insurance charge on rent has been scrapped.
- Company landlords sidestep the new rates, but not every cost.
What the Government Landlord Tax Hikes Can Change
Rent has always been taxed like a salary. That ends in 2027. The Treasury is carving property income into its band structure, with the detail set out in the HM Treasury technical note on GOV.UK and the law carried in Finance Bill 2025-26.
| Band | Rate Now | Rate from 6 April 2027 |
|---|---|---|
| Basic rate (£12,570–£50,270) | 20% | 22% |
| Higher rate (£50,271–£125,140) | 40% | 42% |
| Additional rate (over £125,140) | 45% | 47% |
The property allowance and the Rent a Room Scheme are untouched. Carried-forward losses must still be set against property income.
Relief on residential finance costs will be given at the new 22% property basic rate, as will withholding under the Non-Resident Landlords Scheme. Savings income follows the same path in 2027; dividends moved first, in April 2026.
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A Change to the Order of Taxation
A second rule change matters almost as much. Your personal allowance and other reliefs must now be set against non-property income first. Income is then taxed in this order: other income, property income, savings, and dividends. So a taxpayer with a job and a flat sees the allowance wipe out wages taxed at 20%, rather than rent taxed at 22%.
Frozen Bands Sharpen the Sting
Rates are only half the story. Thresholds have been frozen since 2022 and will stay frozen until 2031-32. The 2024 Autumn Budget had signalled a return to inflation-linked rises from 2028-29, so this move represents a clear U-turn.
Around 500,000 more people entered the higher-rate band between 2024/25 and 2025/26, taking the total beyond seven million. Rising rents alone can push a landlord into the next band.
What It Means for Rents
Rents are already at record levels. ONS data shows average UK private rents hit £1,388 a month in the year to June 2026, up 3.3%. England averaged £1,446.
The Office for Budget Responsibility was blunt about the outcome: “This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
Passing the cost on is not free. Higher rents bring voids, arrears and turnover.
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The Industry Reaction
Mortgage Introducer collected a wave of sector criticism. Ben Beadle, chief executive of the National Residential Landlords Association, said: “Almost one million new homes to rent are needed by 2031. But this budget will clobber tenants with higher costs while doing nothing to improve access to the homes people need.”
Jason Tebb, president of OnTheMarket, called the measure “disastrous for landlords” after a decade of squeezed yields. Ryan Etchells at Together warned the taxman will still take a sizeable bite from sole trader landlords.
Paresh Raja of Market Financial Solutions called it “yet another jab in the ribs”. Steve Cox at Fleet Mortgages expects a further shift into corporate ownership; 81% of the lender’s recent buy-to-let applications came from limited company borrowers.
How Landlords Can Respond
Two routes dominate planning conversations.
Spousal transfers: Moving a property, or a share of the rent, to a spouse or civil partner can use up lower bands. Such transfers are generally free of capital gains tax.
Incorporation: A company pays corporation tax on profits and keeps full mortgage interest deductibility.
| Factor | Personal ownership | Limited company |
|---|---|---|
| Tax on profit from 2027 | 22% / 42% / 47% | Corporation tax |
| Mortgage interest | 22% tax credit only | Fully deductible |
| Cost to move in | None | CGT 18–24%, 5% SDLT surcharge |
| Taking profit out | Taxed as income | Dividends at 10.75% / 35.75% |
Incorporation suits geared portfolios held by higher-rate owners who reinvest profits. It is no shortcut. Transfers count as a disposal at market value, though incorporation relief may defer the gain, and personal buy-to-let loans usually need SPV refinancing.
Also Read: More and More Families Are Getting an HMRC Letter About Inheritance Tax
Other Changes Landing Alongside
Making Tax Digital for Income Tax began in April 2026 for landlords with gross property or trading income above £50,000. Digital records and quarterly updates replace the old routine. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028.
Ellen Milner of the Chartered Institute of Taxation called this first phase the year’s most significant tax event for many, covering nearly 900,000 taxpayers. Simply Business points out one small mercy: the rumoured 8% National Insurance-style levy on rent, worth £2-3 billion a year, never landed.
Why 2026 is the Year to Act
Champion Accountants runs three-to-five-year retrospective tax and cashflow audits comparing personal and company ownership. Leaving it until 2027 shrinks your options and locks in the bill.
Frequently Asked Questions
When do the new landlord tax rates start?
Ans: Property income rates will change on 6 April 2027. Dividend rates changed earlier, on 6 April 2026.
How much extra tax will landlords pay?
Ans: Two percentage points on rental profit. A landlord with £10,000 of taxable rent at the higher rate pays about £200 more.
Do the new rates apply in Scotland?
Ans: Not automatically. They cover England, Wales and Northern Ireland, with talks under way on devolved rate-setting powers.
Will landlords pay National Insurance on rent?
Ans: No. The rumoured levy was dropped in the budget, so rental income remains outside of National Insurance.
Will rents go up because of this change?
Ans: Most likely. Estimates suggest £20 to £25 a month in England, and the OBR warns of tighter supply.
Is a limited company always better?
Ans: No. It helps geared, higher-rate landlords who reinvest but brings CGT, stamp duty and refinancing costs of its own.
Sources & References:
- Simply Business – The rumoured 8% National Insurance-style levy on rent, worth £2-3 billion a year, never landed.
- Mortgage Introducer – The landlord tax hike has collected a wave of sector criticism.
- Chartered Institute of Taxation – The first phase of this year’s most significant tax event for many, covering nearly 900,000 taxpayers.
