Landlords will pay income tax of up to 49% on their rental profits from April 2027, after the Chancellor added a further two percentage points to property income tax rates in the Budget on 28 October.
From 6 April 2027 the basic, higher and additional rates on property income will be 24%, 44% and 49%, against 20%, 40% and 45% today. The new rates apply in England, Wales and Northern Ireland and come on top of a two-point increase announced in the 2025 Budget.
The Office for Budget Responsibility (OBR), the government’s official forecaster, estimates the latest rise will raise around £400 million a year from 2028/29. It has trimmed that figure because it expects some landlords to move their properties into limited companies, where profits pay corporation tax instead.
Forecaster expects rents to rise
The OBR describes the combined four-point increase as “a material reduction in returns to private landlords”. It says fewer people are likely to become landlords, and those who stay will gain more power to set prices. The measures risk a steady long-term rise in rents if demand outstrips supply, an outcome the OBR thinks is “more likely than not”.
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), says: “The Chancellor is yet again trying to balance the books on the backs of landlords.”
Mr Beadle adds: “This will mean one thing: higher rents.”
The Treasury says it is “keeping the rates of tax paid on earnings unchanged, while seeking an additional contribution from those with taxable income from assets”. HMRC will also consult on collecting more data on rental income from third parties.
What the rise costs a typical landlord
A higher-rate taxpayer with £12,000 of taxable rental profit pays £4,800 a year at today’s 40% rate. From April 2027, at 44%, the bill rises to £5,280, an extra £480 a year.
A basic-rate taxpayer with £10,000 of profit, all within the basic-rate band, would see the bill rise from £2,000 to £2,400.
The tax change lands as the OBR expects house prices to grow by about 2% this year and 2½% in 2027. It forecasts the average interest rate on outstanding mortgages to rise from 4% in 2026 to around 5% by 2031.
Moving property into a company can trigger capital gains tax and stamp duty on the transfer, and money taken out of the company is taxed again as dividends or salary.
Who owns each property, how it is financed and whether it still earns its place alongside your other investments all affect how much the change will cost you. So does the capital gains tax and inheritance tax position if you plan to sell or pass the property on.
If you own rental property and want to see what the new rates mean for your own numbers, we’d be glad to go through them with you.