Tax & deadlines

Landlords: your rental profit is taxed at 24%, 44% or 49% from April 2027. Here is what it costs you

Updated 12 November 20269 min readLedgers Team

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The short answer
The new landlord tax rates from 6 April 2027
Why it is exactly 4p in the pound
Three landlords, worked through
Mortgage interest: the 20% credit, and the question GOV.UK has not answered
Scotland and Wales
Savings interest rises too
What this does to the incorporation question
Five things to do before April 2027
What Ledgers does, and does not do, for landlords

Tax & deadlines8 of 14

Quick answer

Landlord tax rates from April 2027: rental profit taxed at 24%, 44% or 49%. Worked examples, mortgage interest relief, and what to do before the first bill.

The short answer

Budget 2026 did something new: it gave rental income its own landlord tax rates. From 6 April 2027, property income is taxed at 24% in the basic-rate band, 44% in the higher-rate band and 49% in the additional-rate band. Employment income, pensions and trading profits stay at 20%, 40% and 45%. Savings interest moves to the same new rates as property.

The personal allowance and the band thresholds do not change, so the arithmetic is simpler than it looks: every pound of taxable rental profit costs you 4p more than it does today. A landlord with £15,000 of taxable rental profit pays £600 more a year. With £40,000, it is £1,600 more. One caveat: GOV.UK has not yet said whether the 20% mortgage interest credit changes alongside the rates, and the 4p figure assumes it does not.

GOV.UK's own estimate is that around 5% of taxpayers will see an average rise of £225 in 2027/28, and that by 2031/32 the measure reaches 2.4 million landlords. The first bill at the new rates is not due until 31 January 2029. That is exactly why it is worth understanding now, while the 2025/26 return you are preparing for this January still shows the old rates.

The new landlord tax rates from 6 April 2027

The figures below are from Annex A of the Budget 2026 overview of tax legislation and rates, updated 5 November 2026.

	2026/27	2027/28
Personal allowance	£12,570	£12,570
Basic-rate band	£1 to £37,700	£1 to £37,700
Higher-rate band	£37,701 to £125,140	£37,701 to £125,140
Employment, pension and trading income	20% / 40% / 45%	20% / 40% / 45%
Property income	charged at the main rates	24% / 44% / 49%
Savings income	20% / 40% / 45%	24% / 44% / 49%
Dividend income	10.75% / 35.75% / 39.35%	10.75% / 35.75% / 39.35%
Dividend allowance	£500	£500

The policy paper published on 29 October 2026 says the rates "will take effect for the 2027 to 2028 tax year and subsequent tax years", and that the rates for 2027/28 are set by the Finance Act 2026. Trustees and personal representatives get matching rates, including a 49% trust rate for accumulated and discretionary property income.

Property income here means what the tax rules already call property income: the profit of your UK property business, after allowable expenses. Our guide to allowable expenses for landlords covers what comes off before the rate is applied.

Why it is exactly 4p in the pound

The new rates are each four percentage points above the main rate for the same band. Because the bands themselves do not move, it does not matter whether your rental profit "sits on top of" your salary or underneath it. Whatever band a pound of rental profit lands in, the rate on that pound is four points higher than it would have been. The only rental profit that escapes is the part covered by your personal allowance, which is untaxed in both years.

So the extra tax is 4% of your taxable rental profit, where "taxable" means the part not covered by your allowance. That is the number to write down.

Three landlords, worked through

All three examples use the 2027/28 allowance and bands above and ignore the mortgage interest credit, which is dealt with in the next section because it cancels out of the comparison if it stays at 20%.

Landlord	Other income	Taxable rental profit	Tax on the rental profit, 2026/27	Tax on the rental profit, 2027/28	Extra per year
Employee with one flat	£30,000 salary	£15,000	£3,000 at 20%	£3,600 at 24%	£600
Higher-rate earner with two lets	£60,000 salary	£20,000	£8,000 at 40%	£8,800 at 44%	£800
Retired, pension covers the allowance	£12,570 pension	£40,000	£7,540 at 20% plus £920 at 40% = £8,460	£9,048 at 24% plus £1,012 at 44% = £10,060	£1,600

In the third case the first £37,700 of rental profit fills the basic-rate band and the remaining £2,300 is taxed at the higher rate. Under the new rules the same split applies, four points higher in each band.

If you want your own figure, take the rental profit on your last tax return, knock off any part that was covered by your personal allowance, and multiply by 4%. For a more complete picture of how a landlord's bill is built up today, see how much tax landlords pay.

Mortgage interest: the 20% credit, and the question GOV.UK has not answered

Since April 2020 landlords cannot deduct mortgage interest and other finance costs from rental profit. Instead, GOV.UK's guidance says the tax bill is reduced by "the basic rate value (currently 20%)" of the lowest of three figures: your finance costs, your property profits, and your adjusted total income above the personal allowance. Anything the cap leaves unused carries forward. Our Section 24 guide walks through the mechanics with a worked example.

The policy paper on the new property rates does not mention this credit at all. It does not say whether "the basic rate" for the purposes of the reduction becomes 24% or stays at 20%. Two things follow:

If the credit stays at 20%, a landlord with £10,000 of mortgage interest gets £2,000 off the bill in both years, so the increase is still 4% of the taxable profit. That is the assumption used above.
If the legislation ties the credit to the new 24% property basic rate, the same landlord would get £2,400, which would offset £400 of the rise. Nothing published says this, so do not plan on it.

Watch the Finance Bill and the HMRC guidance that follows it. We will update this article when the position is confirmed.

Scotland and Wales

For individuals, the policy paper says the property rates "will apply to England, Wales and Northern Ireland". It adds that "the governments of Scotland and Wales have been provided with the ability to set property income rates in line with their current Income Tax powers". In practice that means a Scottish landlord's rate on rental profit will be decided in the Scottish Budget, not Westminster. The savings rates are different: those "apply across the UK".

Savings interest rises too

The same measure takes savings income to 24%, 44% and 49%. The personal savings allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate) and the £5,000 starting rate band are unchanged. GOV.UK's illustration is that a basic-rate taxpayer would need more than £150,000 in savings outside an ISA, earning 4%, before the change bites. For landlords who hold deposits and reserves in interest-bearing accounts, it is a second small increase on top of the first.

What this does to the incorporation question

Every landlord with more than one or two properties will now ask whether to hold them in a company. The honest answer has not changed as much as the headlines suggest. Budget 2026 confirmed corporation tax at 19% for small profits and 25% above £250,000, and left the dividend rates alone, so the comparison on the income side moves a little in the company's favour. What has not changed is what it costs to get there. Transferring properties you already own into a company is a disposal for capital gains tax and a purchase for stamp duty land tax. Mortgage lenders reprice, and the company's own compliance costs are permanent.

Run the numbers on your actual portfolio with an accountant before April. The 4% is real, but it is rarely large enough on its own to pay for an incorporation.

Five things to do before April 2027

Find your taxable rental profit on your last return and multiply the part above your allowance by 4%. That is roughly what 2027/28 costs you, before any change to the finance-cost credit.
Separate mortgage interest in your records from day one of 2027/28. The credit is calculated on finance costs as a distinct figure, and the three-way cap means the number has to be right.
Check whether you are also joining Making Tax Digital on the same date. If your gross rent plus any self-employment income was over £30,000 in 2025/26, you start quarterly updates from 6 April 2027. Our post on rent over £30,000 and your January return explains how the January return decides it.
Plan the cash. The first bill at the new rates is the final payment for 2027/28, due 31 January 2029. The two advance payments towards 2028/29 that follow (payments on account) are normally half of that higher bill each.
If you are in Scotland or Wales, wait for your own government's budget before assuming the 24% figure applies to you.

What Ledgers does, and does not do, for landlords

Ledgers keeps a landlord's records the way the tax return needs them: rent and expenses per property, and year-to-date totals in the same categories as the property pages of the return. Mortgage interest is held separately from other costs, so the finance-cost credit can be worked out. The landlord plan covers one or several properties, and you can start keeping your records in Ledgers for free.

Ledgers is not yet on HMRC's recognised list for Making Tax Digital for Income Tax, so quarterly updates and the tax return itself go from recognised software, often your accountant's, using the records you keep here. Our MTD for landlords guide covers that side.

Guidance only, not tax advice. Sources: GOV.UK policy paper Income Tax: changes to tax rates for property and savings income (29 October 2026); Budget 2026 Annex A: rates and allowances (updated 5 November 2026); GOV.UK guidance Tax relief for residential landlords: how it's worked out; Self Assessment deadlines. The worked examples are ours and assume the finance-cost reduction stays at 20%. All as at 12 November 2026.

Frequently asked questions

I am a basic-rate taxpayer. Does the 24% rate apply to me?

Yes. From 6 April 2027 property income in the basic-rate band is taxed at 24% instead of 20%. The personal allowance is unchanged, so rental profit covered by your allowance is still untaxed; every pound above it costs 4p more than today, whichever band it falls in.

Does the new rate apply in Scotland and Wales?

For individuals, the GOV.UK policy paper says the new property rates apply to England, Wales and Northern Ireland, and that the Scottish and Welsh governments have been given the power to set property income rates in line with their existing income tax powers. Scottish and Welsh landlords should wait for their own governments' budgets before assuming the 24% figure. The savings rates apply across the UK.

Does mortgage interest relief change?

GOV.UK's current guidance says the finance-cost tax reduction is worth the basic rate, currently 20%, of the lowest of your finance costs, your property profits and your adjusted total income. The policy paper on the new rates does not say whether that 20% changes. Until legislation says otherwise, plan on the credit staying at 20% while the tax on the profit rises.

Does the 24% rate apply to a limited company that owns property?

No. These are income tax rates for individuals and trustees. A company pays corporation tax on its rental profit, 19% small profits rate and 25% main rate, which Budget 2026 confirmed are unchanged. Money taken out as dividends is then taxed at the dividend rates, which are also unchanged.

When do I first pay tax at the new rates?

The rates apply to the 2027/28 tax year, which runs from 6 April 2027 to 5 April 2028. The final payment for that year (the balancing payment) is due by 31 January 2029. The two advance payments HMRC then asks for towards 2028/29 (payments on account) are normally half of that higher bill each.

Is savings interest affected too?

Yes. From the same date the savings income rates rise to 24%, 44% and 49%, UK-wide. The personal savings allowance of £1,000 for basic-rate and £500 for higher-rate taxpayers is unchanged, as is the £5,000 starting rate band for savings.

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