The short answer. From 6 April 2027, rental profit in England, Wales and Northern Ireland is taxed at 24%, 44% and 49% instead of 20%, 40% and 45%. The mortgage interest credit rises from 20% to 24%. So the extra tax is roughly 4p for every £1 of taxed rental profit, minus 4p for every £1 of mortgage interest you get the credit on.
A landlord with £10,000 of profit and no mortgage pays about £400 a year more. With a large mortgage, much less. The rates were announced at Budget 2026 and become law when Finance Bill 2026-27 passes (gov.uk).
The rates, before and after
| Rental profit taxed in the | 2026 to 2027 | 2027 to 2028 |
|---|---|---|
| Basic rate band (first £37,700 of taxable income) | 20% | 24% |
| Higher rate band (up to £125,140) | 40% | 44% |
| Additional rate band (over £125,140) | 45% | 49% |
| Mortgage interest (finance cost) credit | 20% | 24% |
| Personal Allowance | £12,570 | £12,570 |
Wages, pensions and self-employment profit stay at 20%, 40% and 45%. Sources: Budget 2026 Annex A: rates and allowances; HMRC tax information note on property, savings and dividend rates (credit at the property basic rate). Budget 2025 first announced 22/42/47%; Budget 2026 raised them to 24/44/49%.
Three things change, not one
- Higher rates on rental profit. 4 percentage points more in every band.
- A bigger mortgage interest credit. You still can't deduct mortgage interest on a home you let; you get a credit instead, now 24%. It's capped at the lowest of your finance costs, your rental profit and your income over the Personal Allowance, and anything unused carries forward.
- Your Personal Allowance goes on other income first. From 2027 to 2028 the £12,570 is set against wages, pensions and self-employment before rental profit. That matters most to landlords with a small pension or part-time job: the part of their income that gets taxed is now rental profit at 24%, not other income at 20%.
Free calculator: your rental tax, this year vs 2027
Type your figures for a normal year. It stays in your browser: nothing is sent or saved. If you own jointly, use your share.
Six worked examples
Same figures in both years, England. "Rental tax" is the Income Tax you pay because of the rental: your tax with it, minus your tax without it.
| Landlord | Rental tax 2026/27 | 2027/28 | Extra a year |
|---|---|---|---|
| Sue, £30,000 salary, one flat, £10,000 profit, no mortgage | £2,000 | £2,400 | £400 |
| Ken, £8,000 pension, £12,000 profit, no mortgage. Allowance now goes on his pension first | £1,486 | £1,783 | £297 |
| Priya, £45,000 salary, £20,000 profit, no mortgage: crosses into the higher band | £6,946 | £7,746 | £800 |
| Tom, £60,000 salary, £1,500 a month rent, £3,000 costs, £600 a month mortgage interest | £4,560 | £4,872 | £312 |
| Ash, £95,000 salary, £20,000 profit, £10,000 interest: loses part of the Personal Allowance | £9,000 | £9,400 | £400 |
| Jo, £150,000 salary, £30,000 profit, no mortgage | £13,500 | £14,700 | £1,200 |
Tom's case is the one that stings. His cash left after costs and interest is £7,800, and tax takes £4,560 of it now (58%) and £4,872 from 2027 (62%), because 44% is charged on his profit before interest but the interest only gets a 24% credit. Each example is in the calculator's tests.
Who's hit hardest
- Landlords without a mortgage pay the full 4p per £1 of profit: nothing comes back through the credit.
- Higher-rate landlords with big mortgages pay less extra in pounds, but the gap between 44% on profit and a 24% credit means tax takes a bigger share of the cash they actually keep. Some already pay tax while losing money in cash terms.
- Landlords with small pensions lose the benefit of their unused allowance being set against rent at the lower rate.
- Landlords between £100,000 and £125,140 are in the Personal Allowance taper. Each extra £1 of rental profit costs 60p in tax now and 64p from 2027: 44p on the profit itself, plus 20p because 50p of allowance is lost and your other income (taxed at 40%) is what that allowance was covering.
What you can do before April 2027
None of this is advice: these are the questions to take to an accountant.
- Claim every allowable cost. Each £1 of genuine running cost saves 24p or 44p from 2027, not 20p or 40p. Agent fees, repairs, insurance, safety certificates, ground rent, service charges, accountancy, travel to the property all count. Improvements don't.
- Keep records you can trust. Landlords with more than £30,000 of rent need Making Tax Digital from April 2027 anyway (check with our free calculator), so quarterly records are coming.
- Joint ownership. Rent from property owned with a spouse or civil partner is split 50:50 for tax unless you own it in unequal shares and tell HMRC (Form 17). If one of you pays a lower rate, that split matters more now.
- Raising the rent. The calculator shows the rise that would cover the extra tax. In England, increases for periodic tenancies go through Section 13 and Form 4A, and the tenant can challenge them at tribunal.
- Incorporation and selling up are big decisions with Stamp Duty Land Tax, Capital Gains Tax and mortgage costs of their own. Don't make them from a headline rate.
Keep the numbers the new rates depend on
Our UK landlord records spreadsheet (£14) logs rent and costs per property, gives quarterly MTD totals and SA105 box totals, and now works out the mortgage interest credit for the year you pick: 20% up to 2026/27, 24% for 2027/28. The Landlord Kit (£27) adds Landlord Skills Pro, AI skills for ChatGPT, Gemini or Claude that draft rent increase letters, arrears messages and year-end records checks.
Free first: Landlord Skills for rent-increase, repair and tenant messages, and more calculators at polytheseus.com/tools.
FAQ
How much is tax on rental income going up in April 2027?
From 6 April 2027 rental profit has its own rates in England, Wales and Northern Ireland: 24% basic, 44% higher and 49% additional, up from 20%, 40% and 45%. That's 4p more on every pound of taxed rental profit. The mortgage interest credit rises from 20% to 24% at the same time, which gives some of it back.
What are the property income tax rates for 2027 to 2028?
Property basic rate 24%, property higher rate 44%, property additional rate 49%, announced at Budget 2026 on 28 October 2026 and due to be legislated in Finance Bill 2026-27. The bands don't change: basic rate on the first £37,700 of taxable income, additional rate over £125,140, Personal Allowance £12,570.
Does the mortgage interest tax credit change in 2027?
Yes. Landlords can't deduct residential mortgage interest; they get a tax credit at the basic rate instead. From 2027 to 2028 it's given at the property basic rate, so 24% instead of 20%. It's still capped at the lowest of your finance costs, your rental profit and your income above the Personal Allowance.
Is my Personal Allowance used differently from April 2027?
Yes. From 2027 to 2028 allowances and reliefs are set against wages, pensions and self-employment first, and only what's left covers rental, savings and dividend income. If your other income is under £12,570, the part of your income that gets taxed is now rental profit at 24%, not other income at 20%.
Do the new property rates apply in Scotland and Wales?
The 24/44/49% rates are set for England, Wales and Northern Ireland. Scotland and Wales have been given the power to set their own property rates; Scottish taxpayers currently pay Scottish rates on rental profit, and the Scottish Parliament hasn't announced 2027 to 2028 property rates yet.
Does this affect landlords with a limited company?
No. Rent received by a company is taxed through Corporation Tax, which these changes don't touch. Dividends you take from the company are taxed at the dividend rates, which rose in April 2026. Moving existing property into a company usually means Stamp Duty Land Tax and Capital Gains Tax, so get advice first.
Sources
- Budget 2026: Overview of tax legislation and rates, 1.2 Property rates for 2027 to 2028 (HM Treasury and HMRC, 28 October 2026)
- Budget 2026 Annex A: rates and allowances (bands, Personal Allowance, property rates)
- Income Tax: changes to tax rates for property, savings and dividend income (HMRC, 27 November 2025): allowances against other income first, finance cost relief at the property basic rate
- Changes to tax relief for residential landlords: how it's worked out (HMRC): the finance cost credit and its cap
This page explains HMRC's published rules in plain English. It's an estimate tool and general information, not tax advice: the 2027 to 2028 rates are announced but not yet law, and your circumstances may differ. Check gov.uk or a qualified accountant. Last checked against gov.uk on 31 October 2026.