Key takeaways
- From 6 April 2027 rental profit gets its own tax rates: 22% at the property basic rate, 42% at the property higher rate and 47% at the property additional rate.
- That is 2p more tax on every pound of taxable rental profit. On £20,000 of taxable profit it costs £400 a year, and on £40,000 it costs £800.
- Relief for mortgage interest moves from 20% to 22% on the same day, so the extra 2p lands on profit measured after interest rather than before it.
- A landlord whose mortgage interest matches taxable property profit pays £3,600 in the worked example below, in 2026-27 and in 2027-28 alike.
- From April 2027 the £12,570 personal allowance has to come off earnings before it comes off rent. That ordering rule is worth at most £251.40 a year.
Landlord tax in 2027 adds 2p to every pound of taxable rental profit
You've come here for your own number, so here it is first. From 6 April 2027 rental profit no longer shares the rates that apply to a salary. It gets its own three: 22%, 42% and 47%. The rates it leaves behind are 20%, 40% and 45%. Every band moves by the same 2 percentage points, so the extra tax is 2p for each pound of taxable rental profit, whichever band that pound falls in.
On £10,000 of taxable profit that's £200 a year. On £20,000 it's £400, and on £40,000 it's £800. Those figures hold whether you earn £30,000 alongside the rent or £60,000, because the gap between the old rate and the new one is 2 points at every level. The chart above sets the six rates against each other.
Two things complicate that clean answer, and both arrive on the same day. Relief for mortgage interest rises from 20% to 22%. And the personal allowance has to be set against earnings before rent. The first shrinks the bill for geared landlords. The second raises it for a smaller group. Both are worked through below.
What the rent costs at nine combinations of earnings and profit
The table covers England, Wales and Northern Ireland. It assumes one landlord with a full £12,570 personal allowance, no mortgage interest, and no savings or dividend income. "Tax on the rent" is total income tax with the rental profit, less total income tax without it. Both years use the same thresholds: a £12,570 allowance, a £37,700 basic rate limit and a £50,270 higher rate threshold. Finance Act 2026 holds the first two at those levels through to 2030-31.
| Other income | Taxable rental profit | Tax on the rent, 2026-27 | Tax on the rent, 2027-28 | Increase |
|---|---|---|---|---|
| None | £10,000 | Nil | Nil | Nil |
| None | £20,000 | £1,486 | £1,635 | £149 |
| None | £40,000 | £5,486 | £6,035 | £549 |
| £30,000 salary | £10,000 | £2,000 | £2,200 | £200 |
| £30,000 salary | £20,000 | £4,000 | £4,400 | £400 |
| £30,000 salary | £40,000 | £11,946 | £12,746 | £800 |
| £60,000 salary | £10,000 | £4,000 | £4,200 | £200 |
| £60,000 salary | £20,000 | £8,000 | £8,400 | £400 |
| £60,000 salary | £40,000 | £16,000 | £16,800 | £800 |
Find your row and the last column always comes to the same thing: 2% of the profit that was taxable in the first place. The top three rows look different only because the personal allowance is doing the work. A landlord with no other income and £10,000 of profit is under the £12,570 allowance, so nothing changes, because nothing was taxed. At £20,000 of profit the taxable slice is £7,430, and 2% of that is £149.
The salaried rows show why the band you are in barely matters. The £30,000 earner with £40,000 of profit straddles the higher rate threshold, so part of the rent is taxed at 22% and part at 42%. The £60,000 earner has used the basic band already, so all of the rent is taxed at 42%. Both land on £800, because 42% exceeds 40% by exactly as much as 22% exceeds 20%. The same 2 point step applies in the additional rate band, where 45% becomes 47%.
The property rates are already law, the rates they replace are not
This matters for how much weight to put on the table. The new property income tax rates for 2027 are enacted. Finance Act 2026 received Royal Assent on 18 March 2026, and section 7 says that for 2027-28 "the property basic rate is 22%, the property higher rate is 42%, and the property additional rate is 47%". Section 6 creates the rates and defines property income. Schedule 1 switches relief for residential finance costs from the basic rate to the property basic rate.
The 20%, 40% and 45% in the other column are a different kind of figure. Parliament sets the main rates one year at a time, and Finance Act 2026 section 2 sets them only for 2026-27. HM Treasury's technical note of 26 November 2025 states the policy plainly: "The government is making no changes to the tax rates on employment and self-employment income." That's a stated intention and not a statute, so every "2 points" in this piece rests on the main rates staying where they are.
The personal allowance is not withdrawn, but the choice of where to put it is
The scariest reading of the landlord tax changes in 2027 is that landlords lose the personal allowance. They don't. What changes is the order it comes off in. Finance Act 2026 inserts a new subsection into the income tax calculation requiring that reliefs and allowances "must be deducted from components of income other than property income, savings income or dividend income (so far as it would otherwise be possible to do so)" first.
Until April 2027 that ordering is irrelevant, because rent and wages are taxed identically. Once rent is taxed 2 points higher, a taxpayer would rather spend the allowance on the rent. The new rule removes the option. The most it can cost is 2% of the allowance actually diverted, so £251.40 on a full £12,570. If your earnings already exceed the allowance, as in both salaried cases in the table, it costs you nothing at all.
Where it bites is the landlord with a small amount of earned or pension income. Take £12,570 of salary and £20,000 of rental profit. Setting the allowance against the rent would leave £12,570 of salary taxed at 20% and £7,430 of rent at 22%, a total of £4,148.60. Setting it against the salary first leaves £20,000 of rent taxed at 22%, which is £4,400. The difference is the full £251.40. HM Treasury's note confirms the specific allowances are untouched: the £1,000 property allowance, the dividend allowance and the personal savings allowance still apply to their own income first.
The 22% finance cost credit moves the sum onto cash profit
Most of what makes rental tax strange in the UK predates this Budget. Since 6 April 2020, mortgage interest on residential lettings has not been deductible from rental income. Instead it buys a tax reduction at the basic rate, which is why a landlord can owe tax on a cash loss. That machinery is the subject of buy-to-let Section 24, and it does not change in 2027. The rate attached to it does.
HM Treasury's note is explicit: "relief for residential finance costs will be calculated at the property basic rate (22%)". That one line is what keeps the rental income tax increase in 2027 proportionate. Work an example. A landlord earning £60,000 has gross rent of £20,000, other allowable expenses of £2,000 and mortgage interest of £9,000. Taxable property profit is £18,000, because the interest is not deducted. Cash profit is £9,000.
In 2026-27 the £18,000 is taxed at 40%, which is £7,200, and the credit is 20% of £9,000, which is £1,800. Tax of £5,400. In 2027-28 the £18,000 is taxed at 42%, which is £7,560, and the credit is 22% of £9,000, which is £1,980. Tax of £5,580. The increase is £180, and £180 is 2% of the £9,000 of cash profit, not 2% of the £18,000 the tax is computed on.
So the two changes together land the extra 2p on what the landlord actually keeps before tax. That is a more defensible design than raising the rate alone, and it is the part of the measure the three headline percentages hide.
A heavily geared landlord pays exactly the same tax either side of April 2027
Push the same example further and the increase disappears. Keep the £20,000 of rent and the £2,000 of other expenses, but make the mortgage interest £18,000. Taxable property profit is still £18,000. Cash profit is nothing.
HMRC's guidance sets the credit at the basic rate of "the lower of" three amounts: finance costs, property business profits, and adjusted total income above the personal allowance. Here the binding figure is property profits, £18,000. In 2026-27 the tax is 40% of £18,000 less 20% of £18,000, which is £3,600. In 2027-28 it is 42% of £18,000 less 22% of £18,000, which is also £3,600. Both sides of the sum moved 2 points, so they cancel.
That is not a loophole. It is the arithmetic of a credit capped at the amount being taxed. It means the landlords most exposed to the finance cost restriction are the ones the 2027 rates leave alone, and the landlords with no mortgage are the ones who pay the full 2%. HMRC also notes the reduction "can't be used to create a tax refund", so there is no gain below zero.
Who the new property income tax rates for 2027 actually reach
HMRC's policy paper of 27 November 2025 estimates that by 2029 to 2030, "2.4 million landlords (6% of taxpayers in 2029 to 2030) will face an increase in tax as a result of this measure". The Budget scorecard puts the yield from the property rates at £5 million in 2027-28, £590 million in 2028-29 and £435 million in 2029-30. Most of the tax on 2027-28 rent is not due until the 31 January Self Assessment deadline after that tax year ends, which is why the first line is so small. HMRC's own systems work for the three rate changes together is costed "in the region of £3.2 million". That January deadline is now the last of five filings rather than the only one, because Making Tax Digital for landlords added four quarterly updates a year above the qualifying income threshold. A landlord meeting that date for the first time meets it twice over, because the balancing payment arrives alongside a first payment on account for Self Assessment.
The population is smaller and poorer than the debate suggests. HMRC's property rental income statistics for 2026, covering 2024 to 2025, count 2.88 million unincorporated landlords declaring property income, with average income per landlord of £20,500. That is gross rent, not profit. Of those landlords, 1.3 million declared £10,000 or less of property income, which is 45% of them. Finance costs are concentrated too: 1.15 million landlords claimed £12.82 billion of residential finance costs, around £11,100 each, and that single category is 37% of all expenses claimed against UK property income.
Put those together and the median experience of the rental income tax increase in 2027 is tens of pounds, not thousands. The figure in the table closest to most landlords is the £149, not the £800.
The objection worth taking, and where it leaves the gap with earned income
The strongest objection to calling this a 2p change is that 2p was never the point. The government's stated reason for the measure is worth testing on its own terms. HM Treasury's note says those with property income "pay less tax than those whose income comes from employment or self-employment as they do not pay National Insurance", and that the increase is meant "to narrow this gap".
Check it at each band, using the 2026-27 National Insurance rates on GOV.UK. An employee pays 8% on weekly earnings between £242 and £967, and 2% above that. So a basic rate employee faces 28% at the margin and a basic rate landlord faces 20%, an 8 point gap that becomes 6 points in 2027. A higher rate employee faces 42%, which is what a landlord faces on rent from April 2027. At the additional rate it is 47% against 47%. The gap closes entirely at the top and only by a quarter at the bottom, which is the reverse of what "narrowing the gap" suggests.
The comparison has two honest caveats that cut in opposite directions. HM Treasury's own footnote excludes employer National Insurance, which runs at 15% in 2026-27, so on a total-cost view the gap with employment stays wide. And most people stop paying National Insurance after reaching State Pension age, so for a retired landlord there is no gap to narrow, and from April 2027 rent is taxed above pension income. The same measure raises tax on savings interest in 2027 to the identical 22%, 42% and 47%, which hits the same retired households twice.
Scotland keeps its own rates, and Wales is inside the new ones for now
The property rates apply in England, Wales and Northern Ireland. A Scottish taxpayer's rental profit stays on the Scottish rates, which in 2026-27 run 19%, 20%, 21%, 42%, 45% and 48%. A Scottish landlord in the higher band already pays 42% on rent, so the new UK property higher rate merely matches what Scotland charges today.
Finance Act 2026 section 8 hands the Scottish Parliament and the Senedd the power to set their own property rates, but section 8 was "not in force at Royal Assent" and comes into force "on such day as the Treasury may by regulations appoint". So there are two unsettled questions here, not one: when the power switches on, and what each legislature then does with it.
What these landlord tax 2027 figures cannot tell you
Every number in the table is an illustration built on statute, not a reading of your return. It models one person, one property business, and nothing above £100,000 of income, where the personal allowance taper creates marginal rates this piece does not attempt. It ignores joint ownership, partnerships, trusts, losses carried forward, the High Income Child Benefit Charge, student loan repayments and the £1,000 property allowance. Any one of those can move the answer more than 2 points does. The high income child benefit charge reads adjusted net income rather than property profit, so property income feeds into it.
The population figures have limits of their own. The 2.4 million is HMRC's projection for 2029 to 2030, not a count. The property rental income statistics cover only unincorporated landlords who file a Self Assessment return, so companies holding rental property are absent, and HMRC says the estimates "are subject to revision". The 82% of landlords HMRC once estimated were unaffected by the finance cost restriction was measured at 2016 to 2017 rates and thresholds, which have moved since.
What a published rate cannot tell you is what rent, interest and expenses your own business runs at next year, which is what decides whether 2% of profit is a rounding error or £800. LedgerTouch tracks the property and liability side of a portfolio over time, which is where that number comes from rather than from a rate table.
What would change the answer
If the main rates move for 2027-28. Parliament sets them annually and has not set them yet. A change to 20%, 40% or 45% in a future Budget rewrites the gap, in either direction, without touching the property rates at all.
If the thresholds unfreeze. The £12,570 allowance and £37,700 basic rate limit are fixed to 2030-31. Unfreezing them would move which band your rent sits in, and that matters far more than the 2 points: the £30,000 earner in the table pays 22% on £20,270 of rent and 42% on the rest purely because of where £50,270 sits.
If the Treasury commences section 8. Devolved property rates would split the answer three ways, and a Scottish or Welsh landlord would stop being able to read a UK table at all.
If interest rates fall far enough. The whole offsetting effect of the 22% credit depends on having finance costs. A landlord who repays the mortgage moves from the group that pays nothing extra to the group that pays the full 2% of profit, and the measure gets more expensive for them, not less. The thing to watch is not the rate. It is the ratio of your interest bill to your taxable property profit, because that single number decides whether any of this reaches you. For the rates and allowances that frame it, the UK investment tax rates table carries the 2026-27 position, and UK dividend tax covers the order the other income types are taxed in. The property rates were raised again at Budget 2026 on 28 October 2026, and what does Budget 2026 mean for me carries the revised 24%, 44% and 49% next to the tax on earnings.