Rental Income Tax Rises Again: What the 2026 Budget Means for Landlords

The new rates

From 6 April 2027, rental profits will be taxed at 24%, 44% and 49%, depending on which income tax band they fall into.

The rates on your salary, pension or self-employed earnings are not changing. The higher rates apply only to income from property, and to savings income, which is rising by the same amount.

It is also worth knowing that from April 2027 your personal allowance and tax bands are used up by your other income first. Rental profits sit on top, so more of them are likely to fall into the higher bands. Income tax thresholds also remain frozen until April 2031, which pulls more landlords into the higher bands as rents rise.

The 2027/28 rates set by the November 2025 Budget are already law. The further rise announced this week still has to pass through Parliament in the Finance Bill 2026-27.

Who is affected

The change hits anyone who receives rental income personally and pays income tax on it in England, Wales or Northern Ireland. Scotland sets its own income tax rates.

That includes:

• Buy-to-let landlords with one property or a portfolio held in their own name
• Joint owners, each taxed on their own share of the profit
• Holiday let owners, because furnished holiday lets lost their special tax treatment in April 2025 and are now taxed like any other rental property
• HMO and multi-unit block owners holding in personal names

Property held in a limited company is not affected by these rates.

Companies pay corporation tax on their profits, and the Budget left corporation tax and dividend tax rates unchanged.

What happens to mortgage interest relief

The tax credit on your mortgage interest rises to 24% from April 2027, but higher and additional rate landlords still lose out.

Since the Section 24 rules came in, individual landlords cannot deduct mortgage interest from their rental income.

Instead they pay tax on the full profit and receive a tax credit worth 20% of their finance costs. That credit is tied to the property basic rate, so it moves to 24%. A basic rate landlord is broadly protected. A higher rate landlord pays 44% on the profit but only gets 24% back on the interest.

Worked example: higher rate landlord

Rental profit before mortgage interest of £20,000 and mortgage interest of £10,000, with all of the profit in the higher rate band.

This landlord keeps £400 less a year on the same rent, £200 of which comes from this week’s announcement alone. As a share of the £10,000 actually left after paying the lender, the tax bill rises from 60% to 64%.

This is a simplified illustration only. It assumes the credit is not restricted by the profit or income limits. Your own position depends on your other income, allowances and costs.

What has not changed

The Budget left most other landlord taxes where they were.

• Capital Gains Tax: residential property gains are still taxed at 18% and 24%
• Stamp Duty Land Tax: no changes, and the 5% surcharge on additional properties stays
• Corporation tax and dividend tax: rates unchanged, which matters for company landlords
• Income tax thresholds: still frozen until April 2031

Nothing changes for the current tax year. The new rates start on 6 April 2027, which gives landlords a window to review their plans.

Options landlords may want to consider

There is no single right answer, and every route below needs proper tax advice before you act. These are the questions we hear most often.

Buying future properties through a limited company. Companies pay corporation tax on profits and can deduct mortgage interest in full. Limited company buy-to-let mortgages are widely available, although rates and fees can differ from personal-name lending, and taking money out of a company brings its own tax.

Moving existing properties into a company. This can trigger Stamp Duty and Capital Gains Tax, because the company is treated as buying the property from you. For many landlords the upfront cost outweighs the saving, so this needs careful modelling by a tax adviser.

Reviewing ownership between spouses or partners. Where one owner pays a lower rate of tax, a different split of ownership may reduce the overall bill. Any change needs to reflect genuine ownership and may affect your mortgage.

Reviewing your mortgage. With less profit left after tax, the rate you pay matters more. A remortgage review can show whether a better deal, a different term or a change in repayment type improves your cash flow.

Reviewing the portfolio as a whole. Some landlords will choose to sell weaker performing properties, or reduce borrowing, before April 2027.