Property income tax rates from April 2027

What changes and when

The new rates start with the 2027/28 tax year, which begins on 6 April 2027. From then, property income has three rates of its own, while your salary, pension and trading income stay on the usual rates of 20%, 40% and 45%.

Your rental profit is still added on top of your other income. The band it falls into decides which property rate applies: profit in the basic rate band is taxed at 22%, and profit in the higher or additional rate bands at 42% or 47%. Your rental income for 2026/27 is taxed at the current rates.

Who is affected

The new rates apply to you if you pay UK income tax as a taxpayer in England or Northern Ireland and have rental profit. Limited companies pay corporation tax, so property they own is not affected.

Wales

Welsh taxpayers' property rates are worked out in the same way as other Welsh income tax: the UK property rates less 10 percentage points, plus the Welsh rates set by the Senedd. The Welsh rates for 2027/28 have not been set yet. If they stay at 10p in each band, landlords in Wales pay the same property rates as landlords in England.

Scotland

If you are a Scottish taxpayer, your property income stays taxed at Scottish income tax rates. The law allows separate Scottish property rates, but that power has not been switched on and no Scottish property rate has been announced. The mortgage interest credit still rises to 22%, so a Scottish landlord with a mortgage can pay slightly less.

A Scottish landlord earning £45,000, with £18,000 rent, £3,200 of running costs and £6,400 of mortgage interest, pays £4,936 of tax on the rent in 2026/27 and £4,808 in 2027/28, which is £128 less. Scottish bands for 2027/28 are not set yet, so this assumes the 2026/27 bands. The guide to rental income tax in Scotland has the detail.

Worked example: a higher rate landlord in England

A landlord earns £45,000 from their job. They receive £18,000 rent, spend £3,200 on letting fees, repairs and insurance, and pay £6,400 of mortgage interest. The figures are the same in both years.

Mortgage interest credit, 2026/27

£1,280

Tax caused by the rent, 2026/27

£3,586

Mortgage interest credit, 2027/28

£1,408

Tax caused by the rent, 2027/28

£3,754

Extra tax each year

£168

Every pound of profit is taxed 2 percentage points higher, but the credit on the interest also rises by 2 points, which offsets part of the increase.

A basic rate landlord with no mortgage

A landlord earns £20,000 and receives £10,000 rent, with no expenses claimed and no mortgage. Their tax on the rent rises from £2,000 in 2026/27 to £2,200 in 2027/28, an increase of £200. With no finance costs, there is no larger credit to soften the change.

The mortgage interest credit rises to 22%

From 6 April 2027, finance cost relief is calculated at the property basic rate of 22%, up from 20%. The credit is still limited to the lowest of your finance costs, your property profits and your income above the personal allowance, and unrelieved costs are still carried forward. The rules are explained in Section 24 mortgage interest relief explained.

The new order for using your personal allowance

From 2027/28, your personal allowance and other reliefs are set against your employment, pension and trading income first, and only then against property, savings and dividend income. This matters now that property income has higher rates, because the allowance shelters the income taxed at the lower rates first. If your other income is below the personal allowance of £12,570, the unused part still covers your rental profit.

The change is already law

The property income rates are confirmed. They were announced at the Budget on 26 November 2025 and are set out in section 7 of Finance Act 2026, which received Royal Assent on 18 March 2026.

Savings and dividend rates are changing too

The same Budget raised the rates on other kinds of unearned income. Savings income rates rise by 2 percentage points to 22%, 42% and 47% from April 2027. The dividend ordinary and upper rates have already risen by 2 points, to 10.75% and 35.75%, from April 2026. The rental income tax calculator does not include savings or dividend income.

What you can do now

The most useful step is to understand what the change means for your own figures before the 2027/28 tax year starts.

• Run your figures through the calculator for 2026/27 and again for 2027/28, and compare the tax on your rent.
• Check you are claiming every cost you are entitled to, using the guide to allowable expenses for landlords.
• Keep records of your mortgage interest and any unrelieved finance costs carried forward, as the credit on them rises.
• If you are unsure how the change affects you, speak to a qualified tax adviser. This site gives estimates, not tax advice.