Landlord Tax Rise 2027: What the 22% Property Income Tax Rates Mean for You
From 6 April 2027, property income tax rates rise to 22%/42%/47% and Section 24 relief moves to 22%, but your actual bill depends on your income, mortgage interest, losses and ownership structure, not just the headline 2-point increase.
Quick answer: From 6 April 2027, individual landlords in England, Wales and Northern Ireland face new, separate property income tax rates: 22% (up from 20%) at the basic rate, 42% (up from 40%) at the higher rate, and 47% (up from 45%) at the additional rate. Section 24 finance-cost relief also moves from 20% to 22%. It's a 2 percentage-point rise at every band, but your actual bill depends on your other income, Personal Allowance, mortgage interest, expenses, losses and whether you own personally or through a company: the headline number alone won't tell you what you owe.
The government has legislated separate Income Tax rates for property income as part of the Finance Act 2026, replacing the 20%/40%/45% rates that have applied to rental profit alongside employment and other income. The change lands on 6 April 2027, and it changes more than the headline percentage: it also touches how the Personal Allowance is allocated across your income sources and how Section 24 finance-cost relief is calculated.
This guide sets out exactly what's changing, works through the Section 24 mechanics under the new 22% rate, and looks at when (if at all) a limited company structure is worth investigating as a result.
Note: this article covers property income tax rates in England, Wales and Northern Ireland. Scotland has a separate Income Tax system. This is general information, not personal tax advice.
Landlord tax rates from April 2027 at a glance
| Property income rate | Current rate | From 6 April 2027 | Increase |
|---|---|---|---|
| Property basic rate | 20% | 22% | +2 percentage points |
| Property higher rate | 40% | 42% | +2 percentage points |
| Property additional rate | 45% | 47% | +2 percentage points |
The new rates apply to property income only: they don't touch the ordinary Income Tax rates that apply to employment, pension or other non-property income. A landlord earning £60,000 from a salary doesn't start paying 42% on that salary; the higher rate only bites on the property income sitting in that band. The government has published both a policy summary and a more detailed technical note setting this out, and the rates themselves are fixed in the Finance Act 2026.
Example: £10,000 of property income
If £10,000 of taxable property income falls entirely within one band, the extra tax is £200 regardless of which band it's in:
| Tax rate | Current tax | From April 2027 | Additional tax |
|---|---|---|---|
| 20% → 22% | £2,000 | £2,200 | +£200 |
| 40% → 42% | £4,000 | £4,200 | +£200 |
| 45% → 47% | £4,500 | £4,700 | +£200 |
That's a clean illustration, not a forecast. In practice your property income sits alongside your wider tax position, and allowances, expenses, losses and finance-cost relief all move the real number.
When do the new rates start?
The new property income rates take effect on 6 April 2027, applying to the 2027-28 tax year and onward unless the legislation changes again. For 2026-27, the current 20%/40%/45% rates still apply in full. Nothing changes before the new tax year begins.
Does this mean every landlord pays 2% more?
Not automatically. The increase is 2 percentage points at each band, but how much extra tax you actually pay depends on how much property income you have and which band it falls into. A landlord with £5,000 of property income taxed entirely at 22% pays £1,100 on it, against £1,000 at 20%: a £100 difference, not the full 2% of some larger total.
The real calculation also has to account for your Personal Allowance, any employment or pension income, allowable property expenses, carried-forward property losses, and the Section 24 finance-cost tax reduction. Treating "rental profit × 2%" as your answer will usually be wrong in one direction or the other.
A change to how allowances are allocated
A less obvious part of the reform matters most for landlords who also have employment or self-employment income. From April 2027, the Income Tax calculation rules generally apply allowances and reliefs (including the Personal Allowance) to non-property, non-savings and non-dividend income first, where possible. HMRC's technical note gives the example of the Personal Allowance being set against employment income before property income.
Take a landlord with £30,000 of employment income and £3,000 of property income. Under the new ordering, the £12,570 Personal Allowance is used against the £30,000 salary first, leaving £17,430 of employment income taxable. The £3,000 of property income is then taxed separately at the property rate: HMRC's own worked example applies 22% to it in full. For landlords who previously relied on unused allowance headroom to shelter some rental income, that headroom may no longer be there once employment income is set against it first.
What happens to Section 24 finance-cost relief?
This is the change that matters most for mortgaged landlords. Individual landlords don't deduct residential mortgage interest directly from rental income. Instead, they get a tax reduction calculated on the finance-cost amount. From April 2027, that reduction is calculated at the new 22% property basic rate, up from 20% today.
Take a landlord with £20,000 rental income, £8,000 of allowable non-finance expenses, and £10,000 of mortgage interest. Property profit before finance costs is £20,000 − £8,000 = £12,000. The £10,000 of finance costs doesn't reduce that figure directly. Instead, it generates a tax reduction of £10,000 × 22% = £2,200, applied against the Income Tax liability.
Basic-rate property taxpayer
If your property income is taxed at 22%, your finance-cost relief is also 22%: the two stay aligned, much as they did under the old 20%/20% pairing.
Higher- and additional-rate property taxpayers
If your marginal property rate is 42% or 47% but your finance-cost relief is fixed at 22%, the gap stays wide. On £10,000 of finance costs at 42%, tax on that income is £4,200 while the relief is only £2,200: a £2,000 shortfall that a heavily mortgaged, higher-rate landlord absorbs every year. Run your own numbers through the Section 24 tax calculator: it models the adjusted 22% relief rate against your actual rental income, expenses, mortgage interest and tax band, rather than a generic example.
Should you move your rental properties into a company?
The 2027 increase will push some landlords to reconsider their ownership structure, but a higher personal rate doesn't automatically mean incorporation wins. A company runs on a different tax system entirely, and the comparison has to cover the whole structure: not just "47% personal tax versus 25% Corporation Tax."
A company carrying on a property business pays Corporation Tax on its profits: 19% within the small profits rate, 25% at the main rate, with marginal relief between £50,000 and £250,000 of profit, subject to associated-company rules. Current rates and thresholds are set out on gov.uk's Corporation Tax rates and allowances page. Corporation Tax isn't the final cost, though: taking profit out of the company personally, whether as salary or dividends, triggers a further layer of tax on extraction.
Why the 19% vs 47% comparison misleads
Two landlords each generating £40,000 of taxable property profit: individually at 42%, that's £16,800 of tax; through a company at 19%, that's £7,600 of Corporation Tax. Read in isolation, the company looks like the obvious winner, but that ignores dividend tax on eventual extraction, accounting and administration costs, financing differences, SDLT on transferring an existing property in, Capital Gains Tax on the transfer, and the different mortgage terms companies typically get. The comparison that matters is total lifetime tax and transaction cost, not the headline rate on profit in isolation. The Ltd Co vs personal calculator runs both structures side by side, including dividend extraction tax, so you're comparing the full picture rather than one rate against another.
Transferring an existing portfolio into a company
Moving a property you already own personally into a company isn't a tax-free administrative step. HMRC's guidance confirms that transfers to a company can trigger SDLT calculated on the property's market value in connected-person situations. See HMRC's SDLT manual on connected-party transactions for how the market-value rule is applied. A transfer can also trigger a Capital Gains Tax charge on the difference between the property's original cost and its current market value, whether or not any cash actually changes hands. On top of the tax, the existing lender may not permit the transfer at all, and a new company mortgage typically comes with different rates, fees, LTV limits and personal guarantee requirements. "Incorporate before April 2027" isn't a universal recommendation: the right question is whether incorporation improves your long-term after-tax return once transfer, financing and extraction costs are all accounted for.
When a company structure is worth investigating, and when it isn't
A company structure is more likely to be worth modelling where you're a higher- or additional-rate taxpayer, carry substantial mortgage interest, plan to retain and reinvest profit inside the company rather than draw it out, and are building a portfolio over a long horizon. It tends to be less attractive where you need most rental profit out personally each year, run a small portfolio, hold properties with large unrealised gains that would trigger CGT on transfer, or would face SDLT and refinancing costs that outweigh the tax saved. There's no single right answer for every landlord: it's a calculation, not a rule of thumb.
Is there a deadline to incorporate before April 2027?
No. 6 April 2027 is when the new property income rates start: it isn't a general deadline for incorporation. If you're weighing a transfer of an existing portfolio, base the timing on the economics of that specific transaction rather than a headline saying you "must" act before the date.
Buying new properties versus transferring existing ones
The calculation is more straightforward for a property you haven't bought yet. You can compare personal versus company ownership before purchase and buy directly into whichever structure comes out ahead, without the SDLT and CGT costs that come with moving an already-owned property across later. The company route still carries its own financing, administration and extraction considerations, but modelling the decision before each purchase avoids the transfer problem entirely.
Should you delay repairs until after April 2027?
Be careful with this one. Landlords using the cash basis recognise property income and expenses when money is actually received or paid, so the date you pay for a repair can determine which tax year the deduction falls in. But deliberately postponing genuine maintenance purely to chase a 2 percentage-point tax difference risks making the problem worse: further damage, a bigger eventual bill, tenant friction, or a safety issue. Where a repair is genuinely discretionary in timing, it's reasonable to model the tax effect of paying before versus after 6 April 2027. Just don't let a small rate difference override necessary work.
What happens to property losses?
Existing loss rules don't disappear. HMRC's technical note confirms that carried-forward property losses continue to be offset against property income under the new rates. A landlord sitting on substantial carried-forward losses shouldn't estimate their 2027 bill by applying 22%, 42% or 47% straight to gross rental income: the losses come off first, the same as today.
Non-resident landlords
The Non-Resident Landlord Scheme currently withholds tax at the basic Income Tax rate. From April 2027, that withholding rate moves to the new 22% property basic rate. This is a withholding mechanism, not necessarily the landlord's final UK tax liability: a non-resident landlord can apply to HMRC to receive rental income without deduction under the scheme, and any tax withheld is credited against the eventual liability.
Who feels this most, and who doesn't
Higher- and additional-rate landlords with a marginal property rate of 42% or 47% against 22% finance-cost relief face the widest gap, especially where borrowing is high. Landlords with employment income should pay particular attention to the new allowance-ordering rules, since previously-unused Personal Allowance headroom may now be consumed by salary first. Portfolio landlords planning to reinvest rather than withdraw profit have the strongest case for re-running a personal-versus-company comparison.
The impact is smaller for landlords with low property income, minimal or no mortgage interest, substantial carried-forward losses, or income that stays comfortably within the basic property band throughout.
2027 landlord tax planning checklist
- Calculate your expected 2027-28 property income and which band(s) it falls into
- Calculate your mortgage interest and other finance costs, and model the Section 24 reduction at 22%
- Check any carried-forward property losses and how they'll offset 2027-28 income
- Review how your Personal Allowance interacts with employment and property income under the new ordering
- Review planned repairs and whether their timing genuinely makes tax or commercial sense
- Compare personal ownership against a limited company for your specific portfolio
- Estimate SDLT and CGT if you're considering transferring existing properties
- Compare personal versus company mortgage rates and availability
- Model the tax cost of extracting company profits as salary or dividends
- Take professional tax advice before transferring any existing property
Model your own numbers
Two landlords with identical rental income can end up with very different tax bills once salary, mortgage interest, expenses, losses and ownership structure are factored in. The headline 22%/42%/47% figures are a starting point, not an answer.
Run your finance costs through the Section 24 tax calculator to see the adjusted relief at 22% against your own numbers, and use the Ltd Co vs personal calculator to compare structures including dividend extraction tax: the same calculators we use ourselves when working through a client's numbers, covered in more depth in our UK landlord tax guide.
Frequently Asked Questions
When do the new landlord tax rates start?
From 6 April 2027, for the 2027-28 tax year onward.
What are the new property income tax rates?
22% property basic rate, 42% property higher rate, 47% property additional rate: each up 2 percentage points from the current 20%/40%/45%.
Is the increase really 2%?
It's a 2 percentage-point increase: the basic rate moves from 20% to 22%, a 10% relative increase but a 2-point absolute one.
Does this apply to limited companies?
No. These are individual Income Tax rates. Companies pay Corporation Tax instead: 19% small profits rate, 25% main rate, with marginal relief between £50,000 and £250,000 of profit, though extracting that profit personally is taxed again.
Does Section 24 relief rise to 22%?
Yes. From 2027-28, residential finance-cost relief for individual landlords is calculated at the 22% property basic rate.
Do higher-rate landlords get 42% mortgage interest relief?
No. Their rental profit may be taxed at 42%, but the finance-cost relief is fixed at the 22% basic rate: the gap between the two is the real cost of leverage under this system.
Does the Personal Allowance change?
The £12,570 allowance itself stays the same. What changes is the order it's applied in: from April 2027 it's generally set against non-property income like a salary first.
Does this apply in Scotland?
No. These rates apply in England, Wales and Northern Ireland. Scotland has its own devolved Income Tax system.
Does the Non-Resident Landlord Scheme withholding rate change?
Yes: it aligns with the new 22% property basic rate from April 2027. This is withholding, not necessarily the final tax owed.
Should I incorporate before April 2027?
Not automatically. It's worth modelling, but transferring existing property can trigger SDLT and CGT, and company profit is taxed again on extraction. There's no universal deadline tied to the date.
Do carried-forward property losses still apply?
Yes: they continue to offset property income in exactly the same way under the new rates.
Can I cut my 2027 tax by paying for repairs after 6 April 2027?
Timing can matter, particularly under the cash basis, but never delay necessary repairs purely to chase a 2 percentage-point difference: the commercial cost of deferred maintenance usually outweighs it.
Key Takeaways
- From 6 April 2027, property income rates rise to 22% (basic), 42% (higher) and 47% (additional) in England, Wales and Northern Ireland: a 2 percentage-point increase at every band.
- Section 24 finance-cost relief rises in step, from 20% to 22%, but the gap to the 42%/47% property rates stays wide for leveraged, higher-rate landlords.
- Allowances, including the Personal Allowance, are generally set against non-property income first from April 2027: a change that particularly affects landlords with employment income.
- Carried-forward property losses still offset property income under the new rules.
- Incorporation isn't automatically the answer: model total lifetime tax including extraction, SDLT and CGT on any transfer, not just the headline Corporation Tax rate.
- There's no deadline forcing incorporation before April 2027: base any transfer on the transaction's own economics.
This article is for general information only and isn't tax or financial advice. Tax legislation and HMRC guidance can change; always check current guidance on gov.uk and speak to a qualified tax adviser about your specific circumstances before making decisions based on the 2027 changes.