Landlord Tax Is Rising in April 2027: What It Means and How to Prepare

From April 2027, landlords will pay more tax on their rental income. It is already law, it affects around 2.4 million landlords, and many still have not heard about it. Here is exactly what is changing and how to prepare.

If you let out property in the UK, a tax rise is heading your way, and it is easy to miss. It was announced quietly in the November 2025 Budget, and it does not take effect until April 2027, so it has slipped under the radar for a lot of landlords. However, it is already set in law, and HMRC estimates it will affect around 2.4 million landlords across the country.

So this guide explains, in plain English, exactly what is changing, who it hits, how much it could cost you, and the practical steps you can take now. Above all, it separates the confirmed facts from the noise, so you can plan properly rather than worry.

The Change at a Glance

What Is Changing in April 2027?

From 6 April 2027, the government is creating a separate set of income tax rates just for property income. In simple terms, rental profit will be taxed at higher rates than it is today.

Here are the new rates, alongside the current ones, so you can see the change clearly.

As you can see, it is a 2 percentage point rise across every band. It was announced in the Budget of 26 November 2025 and is now enacted through the Finance Act 2026. In other words, this is not a rumour or a proposal. It is confirmed law, with a fixed start date.

One subtle but important point: for a basic-rate landlord, moving from 20% to 22% is actually a 10% increase in the tax rate itself, not just 2%. So the impact is a little larger than the headline "2 points" suggests.

Who Is Affected, and Who Is Not

First, this is where it pays to know exactly where you stand, because the change does not hit everyone equally. In fact, how you own your property makes a big difference.

You are affected if:

• You are an individual landlord (owning property in your own name).
• Your property is in England, Wales or Northern Ireland.
• You make a taxable profit on your rental income.

You are not affected if:

• You hold your property through a limited company, which pays corporation tax instead.
• Your rental profit is fully covered by allowances, so you pay no income tax on it anyway.
• Your property is in Scotland, which sets its own income tax rates and is excluded for now.

Notably, the company point is the one generating the most discussion. Because company landlords are not affected, some individual landlords are asking whether they should incorporate. However, that is a complex decision with real costs of its own, and it is not the right answer for everyone. We will come back to that.

How Much Will It Cost You?

So let us put real numbers on it, because that is what matters. The extra tax depends on your rental profit and your tax band. Here are some worked examples based on the new rates.

Simplified illustrations of the rate change only. Your actual bill depends on your full income, allowances and mortgage costs. Always check with an accountant.

As the examples show, for a typical smaller landlord the extra cost runs to a few hundred pounds a year. For those with larger or more profitable portfolios, it adds up faster. It may not sound dramatic on its own. However, it lands on top of other rising costs, and sits alongside the changes in our Autumn Budget 2026 property guide, which is what makes it sting.

Remember, this comes alongside the Renters' Rights Act, tighter energy efficiency rules, and higher borrowing costs than landlords enjoyed a few years ago. Each change is manageable by itself. Together, they squeeze margins, which is exactly why getting your figures right now matters.

Why Is This Happening?

Meanwhile, it helps to understand the thinking behind the change, because it tells you something about where policy may go next. The government has framed it as a fairness measure.

The argument goes like this. Landlords do not pay National Insurance on their rental income, whereas employees pay National Insurance on their wages. By raising income tax rates on property specifically, the government is, in effect, closing part of that gap without formally bringing rent into National Insurance.

Notably, the Chancellor stopped short of applying National Insurance to rental income, which some had expected. Instead, the separate property tax rates were introduced. The measure is expected to raise around £0.5 billion a year from 2028 to 2029 onwards.

There is a bigger signal here too. By creating a separate tax schedule just for property income, the government has given itself, and future governments, a lever to adjust landlord taxes independently of everyone else's. The 2027 rise is the first use of that lever. It may not be the last, and it comes on top of the mansion tax arriving in 2028.

The Section 24 Catch to Remember

In addition, if you have a mortgage on your rental property, there is an extra layer to understand, and it is one many landlords find confusing.

Since the Section 24 rules came in, individual landlords can no longer deduct their full mortgage interest from rental income. Instead, they get a tax credit, currently worth 20% of the interest. From April 2027, in line with the new basic rate, that credit rises to 22%.

That sounds like good news, and for the credit itself it is. However, the wider effect of Section 24 is that heavily mortgaged landlords can end up paying tax on income they have not really kept, because the mortgage interest is not fully deducted first. When the headline rates rise to 42% and 47%, the effective tax rate on your actual cash profit can climb higher still.

How to Prepare Before April 2027

Fortunately, the good news is that you have time. April 2027 is not tomorrow, so you can plan calmly rather than react in a panic. Here are the practical steps worth taking.

• Work out your new bill. Take your expected rental profit and apply the new 22%, 42% or 47% rate. Knowing the real number removes the worry and lets you plan.
• Review your ownership structure, carefully. If you are a higher-rate landlord with several properties, it may be worth asking an accountant whether a company structure suits you. Just remember incorporating brings its own costs, such as Capital Gains Tax and Stamp Duty, so it is not a simple win.
• Get ready for Making Tax Digital. This is expanding. Making Tax Digital already applies to landlords with income above £50,000 from April 2026, and the threshold drops to £30,000 from April 2027, meaning digital records and quarterly updates.
• Check your rent is right. In a rising-cost environment, an under-priced property hurts more. A fair, market-accurate rent protects your margin without deterring good tenants.
• Keep good records. Claim every allowable expense you are entitled to, since reducing your taxable profit is the simplest way to soften the impact.

Prefer to hand it over?

If you would rather someone took the strain off your hands entirely, that is exactly what a good managing agent does. From getting the rent right to verifying tenants properly and keeping you compliant with every new rule, we help East London landlords protect their income. If you are weighing whether to hold or sell, our guide on whether to sell your rental property talks through the options.

Frequently Asked Questions

Here are the questions landlords ask most about the April 2027 tax change. First, the basics. After that, the practical detail.

The basics

Practical detail