From 6 April 2027, rental income will be taxed at its own, slightly higher rates. It was announced in last year’s Budget, so whatever the Budget on 28 October brings, this change is already on the way, but there is still time to see what it means for you.
What is changing
If you own property in your own name rather than through a company, your rental profit will be taxed at 22%, 42% or 47%, which is two percentage points above the usual income tax rates of 20%, 40% and 45%. The tax credit that gives landlords relief on mortgage interest will rise to 22% to match.
The personal allowance, the amount you can earn tax-free, will also be used against your other income first, such as a salary or pension. Rental profit then sits on top, so more of it is taxed at the new rates.
What it costs
In rough terms, and ignoring allowances, the change costs landlords in England, Wales and Northern Ireland about 2p for every £1 of rental profit left after mortgage interest, whatever their tax band. On £10,000 of profit after interest, that’s around £200 a year. For most landlords, the figure will be lower: Hamptons estimated in 2025 that the average landlord, with about £3,500 of profit left after costs and mortgage interest, would pay roughly £70 more a year.
For many landlords that’s modest, and smaller than what a rise in mortgage rates can do. On a £250,000 interest-only mortgage, half a percentage point is £1,250 a year in extra interest. The tax change matters more for larger portfolios, because the two percentage points apply to more profit.
What we would do
We’d treat April 2027 as a prompt to review rather than a reason to act in haste, and three questions are worth asking:
- Do the numbers still work? Test each property at today’s mortgage rates and next April’s tax, not just the portfolio as a whole.
- Is your mortgage right for the next few years? If a deal is ending, looking at your options early gives you more choice.
- Does the way you own the property still suit you? Some landlords consider moving property into a company, where profits are taxed differently, but that’s not automatically better. Company mortgages can cost more, and transferring a property may trigger Stamp Duty Land Tax and Capital Gains Tax. So it’s a decision to take with an accountant or tax adviser first.
Tax rules can change and depend on your circumstances, so treat the figures above as illustrations rather than a forecast of your own bill.
Talk to us
If you own buy-to-let property, we’d be happy to look at your borrowing alongside your plans, whether that means a remortgage, a purchase or simply a sense check. Call 020 8366 4400 or email enquiries@cedarhfs.co.uk.
Your property may be repossessed if you do not keep up repayments on your mortgage. Tax rules can change, and their effect depends on your circumstances. This is general information, not personal or tax advice.