Property Income Tax Rising to 22%, 42% & 47% from April 2027
Last updated 28 June 2026 · 8 min read · By the LandlordTaxAi Editorial Team
The short answer
In the Autumn Budget 2025 the government announced that, from 6 April 2027, the tax rates on property income will rise by 2 percentage points. The property basic rate becomes 22%, the higher rate 42% and the additional rate 47%. For the first time, rental income will be taxed more heavily than employment or trading income at every band.
For years, rental profit has been taxed at the same 20%, 40% and 45% rates as a salary. That is changing. The 2025 Budget introduced a separate, higher set of rates that apply specifically to property, savings and dividend income — with property taking a 2-point increase from the 2027/28 tax year.
This guide explains exactly what is changing, when, who it affects and how much extra it costs, with a worked example. For the full picture of the 2025 Budget, see our Autumn Budget 2025 for landlords roundup.
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Quick Income Tax estimate
A rough Income Tax figure on your total taxable income. The new property rates add roughly 2% of your taxable rental profit on top from April 2027.
Result
- Personal allowance
- £12,570
- Taxable income
- £32,430
- Income Tax due
- £6,486
- Take-home (income − tax)
- £38,514
Uses 2026/27 rates and the £12,570 personal allowance. Estimate only — not tax advice.
The old rates vs the new property rates
Until 5 April 2027, property income is taxed at the normal Income Tax rates. From 6 April 2027, a separate higher set of property rates applies.
| Band | Now (to 2026/27) | From April 2027 |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
The thresholds (the £12,570 personal allowance, the £50,270 basic-rate limit and the £125,140 additional-rate threshold) are unchanged by this measure and remain frozen. Only the rate applied to property profit goes up.
Who is affected
The new rates apply to the taxable profit of individuals from UK and overseas property — buy-to-let, HMOs, holiday lets and rent-a-room income above the allowance. The same 2-point rise also applies to savings and dividend income.
Limited companies are not affected by these Income Tax rates. A company holding property pays Corporation Tax (19%–25%) on its profit instead, which is one reason some landlords look at incorporating — though that brings its own costs and is not right for everyone. See limited company vs personal buy-to-let.
A worked example
Priya is a higher-rate taxpayer with £10,000 of taxable rental profit after expenses and the mortgage interest credit.
| Taxable rental profit | £10,000 |
| Tax now (40%) | £4,000 |
| Tax from April 2027 (42%) | £4,200 |
| Extra tax per year | £200 |
The extra cost is roughly 2% of taxable profit. A basic-rate landlord with the same £10,000 profit would pay about £200 more too (20% to 22%). The bigger the profit, the bigger the increase in cash terms.
Every allowable expense counts more now
With property taxed 2 points higher from 2027, claiming every allowable cost matters. LandlordTaxAi reads your bank statements, categorises them against HMRC’s SA105 rules and keeps MTD-ready records — so nothing deductible slips through.
See how it worksHow to soften the impact
- Claim everything allowable. Repairs, letting fees, insurance, accountancy and more — see allowable expenses for landlords.
- Use both spouses’ allowances. Splitting beneficial ownership can move profit into a lower band — see splitting rental income with a spouse.
- Review your structure. Incorporation may suit some portfolio landlords, but weigh CGT, SDLT and running costs first.
- Keep clean digital records ready for MTD for Income Tax, which is mandatory from April 2026 for many landlords.
Frequently asked questions
When do the new property income tax rates start?
From 6 April 2027 (the 2027/28 tax year). Rental income for 2026/27 is still taxed at the normal 20%, 40% and 45% rates.
What are the new property income tax rates?
The property basic rate becomes 22%, the higher rate 42% and the additional rate 47% — each 2 points above the standard rates.
Does this apply to all landlords?
It applies to individuals letting UK or overseas property. Companies pay Corporation Tax instead and are not affected by these Income Tax rates.
Is employment income taxed at the same rate?
No. Employment and trading income keep 20%, 40% and 45%. From April 2027, property income is 2 points higher at every band.
How much more will I pay?
Roughly 2% of your taxable rental profit. On £10,000 of profit, about £200 more per year.
Can I avoid the increase?
There is no special exemption, but maximising allowable expenses, using personal allowances and reviewing your ownership structure can reduce taxable profit. Take advice before restructuring.
Written and reviewed by the LandlordTaxAi Editorial Team. Our guides are reviewed against current HMRC guidance and updated when the rules change. Operated by LandlordTaxAi, United Kingdom. Follow us on LinkedIn.
Last reviewed: 28 June 2026 · Researched against primary UK sources for the 2027/28 tax year: https://www.gov.uk/government/publications/changes-to-tax-rates-for-property-savings-and-dividend-income/change-to-tax-rates-for-property-savings-and-dividend-income-technical-note ; https://www.gov.uk/government/publications/budget-2025-overview-of-tax-legislation-and-rates-ootlar/budget-2025-overview-of-tax-legislation-and-rates-ootlar . This article is informational only and does not constitute tax advice. Check the latest details on GOV.UK or with a qualified accountant.