Rental Income Tax 2027: New 24%, 44% and 49% Rates Explained
Published By FJP Investment Editorial Team
Published 28 October 2026 | By FJP Investment Editorial Team
The government has announced higher rental-income tax rates in Budget 2026, with property-income rates of 24%, 44% and 49% from 6 April 2027. The measure will be implemented through Finance Bill legislation.
For landlords, the useful question is how those headline rates translate into tax on a particular property’s income. Allowable costs, mortgage interest, other earnings and ownership structure all matter. A tax rate cannot simply be applied to gross rent to produce an accurate bill.
What are the new rental-income tax rates?
The Budget describes the separate rates as applying across England, Wales and Northern Ireland. Scotland’s position requires a separate check.
For a taxpayer in England, the published rates table gives the following comparison:
| Tax band | 2026/27 rate on property income | Previously planned 2027/28 rate | Latest announced 2027/28 rate |
|---|---|---|---|
| Basic | 20% | 22% | 24% |
| Higher | 40% | 42% | 44% |
| Additional | 45% | 47% | 49% |
Today’s Budget adds two percentage points to the rates previously announced for April 2027. Compared with the current England rates, the overall increase would be four percentage points.
The rates apply to the relevant slices of taxable income. They are not flat charges imposed on every landlord regardless of income.
Is rental-income tax charged on rent or profit?
HMRC’s rental-income guidance explains that taxable property profit is worked out after taking account of expenses or allowances that can legitimately be claimed.
For example, £18,000 of annual rent less £3,000 of allowable non-finance expenses produces £15,000 of profit before any separate mortgage-interest tax reduction. This example uses actual expenses rather than the property allowance.
Qualifying expenses can include letting-agent fees, insurance and repairs. Capital improvements are treated differently from routine repairs. Whether a particular cost qualifies depends on the facts and the applicable rules.
For an individual residential landlord, mortgage interest needs separate treatment. Cash left in the bank after paying the lender may therefore differ from taxable property profit.
How much extra tax could a landlord pay?
First consider a simplified landlord with £10,000 of taxable property profit and no finance costs. Assume their other income has used their Personal Allowance and the whole £10,000 falls within one band.
| Illustrative band | Tax at current England rate | Tax under previous 2027 plan | Tax under latest 2027 announcement |
|---|---|---|---|
| Basic | £2,000 | £2,200 | £2,400 |
| Higher | £4,000 | £4,200 | £4,400 |
| Additional | £4,500 | £4,700 | £4,900 |
In each row, the latest announcement adds £200 to the previous plan, or £400 compared with the current year. These are calculations under stated assumptions, not estimates of every landlord’s tax increase. Mortgage-interest relief can change the result.
How does mortgage-interest relief work?
Under the existing residential finance-cost restriction, individual landlords generally receive a tax reduction rather than deducting mortgage interest directly from taxable property profit. Mortgage capital repayments do not qualify as interest.
Relief is subject to limits based on qualifying finance costs, property profits and adjusted total income. It cannot create a tax refund; some unused finance costs may be carried forward.
HMRC’s published framework for April 2027 links this reduction to the property basic rate. Read alongside the newly announced 24% basic rate, that points to a 24% reduction on qualifying costs where fully available. The following projection assumes that announced link is retained in the implemented rules.
Worked example: a higher-rate landlord with a mortgage
Assume an individual landlord in England receives £18,000 rent, has £3,000 allowable non-finance expenses and pays £6,000 qualifying mortgage interest annually. All £15,000 of taxable property profit is in the higher-rate band. Their Personal Allowance is used against other income, and the finance-cost reduction is available in full.
| Annual calculation | 2026/27 | Illustration of announced 2027/28 framework |
|---|---|---|
| Taxable property profit | £15,000 | £15,000 |
| Tax before finance-cost reduction | £6,000 at 40% | £6,600 at 44% |
| Finance-cost reduction | £1,200 at 20% | £1,440 assuming 24% |
| Property-related tax after reduction | £4,800 | £5,160 |
| Cash remaining after listed costs, interest and tax | £4,200 | £3,840 |
In this projection, the annual increase is £360. Applying four percentage points to £15,000 without adjusting the finance-cost reduction would overstate it. The example excludes mortgage capital repayments and is not a complete calculation of the landlord’s overall tax bill.
Are limited-company landlords affected in the same way?
The announced 24%, 44% and 49% rates are Income Tax rates. A company is subject to a different Corporation Tax framework.
HMRC distinguishes company treatment from the residential finance-cost restriction for individual landlords. Company borrowing can be treated differently, but company ownership does not automatically produce a lower overall tax cost. Administration, financing and tax when profits are taken out also matter.
Moving an existing property into a company is a separate decision requiring advice about the transaction and its consequences.
What about landlords living abroad?
UK rental income can remain taxable in the UK when an owner lives overseas. The Non-resident Landlords Scheme can affect collection at source, while overseas tax and treaty relief may also need consideration.
Permission to receive rent without tax deducted does not make the underlying income tax-free. International owners should check both their UK obligations and their country-of-residence position.
When do the changes start?
The announced start is 6 April 2027. The new rates do not apply immediately because the Budget speech has taken place. Final legislation and updated HMRC guidance will determine the operative rules.
Landlords reviewing the effect should separate gross rent, allowable expenses, qualifying finance costs and cash mortgage repayments, then consider how property income fits alongside other earnings. For broader ownership considerations, see our property portfolio guide.
This article provides general information and does not constitute financial, investment, mortgage, legal or tax advice. FJP Investment acts solely as an introducer. It does not provide personalised advice, assess suitability, endorse investments, conduct due diligence on a reader’s behalf, manage investments or hold client money. Tax treatment depends on individual circumstances and may change.
