In short: Budget 2025 (26 November 2025) created separate income tax rates for rental profits from April 2027. Budget 2026 (28 October 2026) then raised those rates by a further two percentage points. From 6 April 2027, landlords in England, Wales and Northern Ireland will pay 24%, 44% or 49% on property income, against 20%, 40% or 45% today. Capital Gains Tax on selling is unchanged at 18% and 24%. So the cost of holding a let portfolio rises, while the tax on selling it stays where it is.
The Key Changes at a Glance
| Measure and start date | What changes |
|---|---|
| Income tax on property income From 6 April 2027 | Budget 2025 set 22% / 42% / 47%. Budget 2026 raised this to 24% / 44% / 49% (basic / higher / additional). England, Wales and Northern Ireland. |
| Mortgage interest (finance cost) credit From 6 April 2027 | Budget 2025 moved the credit from the 20% basic rate to the new property basic rate. With that rate now set at 24%, the credit is expected to follow it. |
| Capital Gains Tax Unchanged | No change. 18% within the basic-rate band, 24% above it, £3,000 annual exempt amount. |
| Savings income tax From 6 April 2027 | 24% / 44% / 49%, across the UK. |
| Dividend tax From 6 April 2026 | Ordinary and upper rates up 2 points to 10.75% and 35.75%; additional rate 39.35%. |
| Income tax thresholds To April 2031 | Personal allowance (£12,570) and higher-rate threshold frozen for a further three years. |
| High Value Council Tax Surcharge From 1 April 2028 | Extra annual charge on homes in England worth £2 million or more, paid by owners. |
| Business Asset Disposal Relief From 6 April 2027 | Lifetime limit cut from £1 million to £500,000. |
| Inheritance Tax Pensions: 6 April 2027 | Nil-rate band (£325,000) and residence nil-rate band (£175,000) frozen to April 2031. Most unused pension funds come into the estate. |
| Stamp Duty Land Tax From 1 May 2026 | No change to purchase rates. SDLT on the rent element of assured tenancies removed. |
Income Tax on Rental Profits: Up Four Points in Two Budgets
Until April 2027, rental profits are taxed at the same rates as earnings: 20%, 40% and 45%. Budget 2025 announced that property income would get its own rates from the 2027 to 2028 tax year, two points higher at 22%, 42% and 47%. Budget 2026 added a further two points on top, so the rates that will actually apply are 24%, 44% and 49%.
The new rates apply to individuals, partnerships, trustees and personal representatives with property income. They apply in England, Wales and Northern Ireland. The government has said it will work with the Scottish and Welsh governments so they can set their own property income rates. Landlords who hold property through a limited company pay Corporation Tax instead, which is unchanged at 19% to 25%.
What it could cost: a simple example
This illustration uses a taxable rental profit of £20,000 and ignores mortgage interest and other reliefs.
| Landlord | 2026 to 2027 | 2027 to 2028 | Extra tax a year |
|---|---|---|---|
| Basic-rate taxpayer | £4,000 (20%) | £4,800 (24%) | £800 |
| Higher-rate taxpayer | £8,000 (40%) | £8,800 (44%) | £800 |
| Additional-rate taxpayer | £9,000 (45%) | £9,800 (49%) | £800 |
Every £10,000 of taxable rental profit costs an extra £400 a year. Because the personal allowance and higher-rate threshold stay frozen until April 2031, rising rents will also pull more landlords into the higher band.
Mortgage interest relief
Under the rules known as Section 24, individual landlords cannot deduct mortgage interest from rental income. Instead they receive a tax credit at the basic rate. Budget 2025 said that from April 2027 the credit will be given at the property basic rate rather than the ordinary 20% basic rate. With the property basic rate now set at 24%, the credit is expected to rise in step. Check the final Finance Act wording with your accountant, because the credit matters a great deal to mortgaged landlords.
What This Means If You Are Thinking of Selling
Neither Budget changed Capital Gains Tax. For 2026 to 2027 and 2027 to 2028, gains on residential property are taxed at 18% within your basic-rate band and 24% above it, after a £3,000 annual exempt amount. Gains on UK residential property must still normally be reported, and the tax paid, within 60 days of completion.
The effect is on the balance between holding and selling:
- Holding costs more. From April 2027, every pound of rental profit is taxed four points higher than today. For a portfolio held mainly for income, the net yield falls.
- Selling costs the same. The tax on a sale has not moved, so a sale in 2027 is taxed at the same rates as a sale today.
- Timing still matters. For CGT, the date of disposal is normally the date contracts are exchanged. Each tax year has its own annual exempt amount and basic-rate band, so some landlords phase sales across tax years. Our Landlord Exit Calculator lets you compare the two approaches with rough figures.
- Reliefs are narrower. Business Asset Disposal Relief is generally not available on ordinary residential lettings, and from 6 April 2027 its lifetime limit falls to £500,000 where it does apply.
None of this means every landlord should sell. Many will keep their portfolio, refinance, or reshape it by selling part. What the two Budgets do is make it worth re-running the numbers. Our guide to Capital Gains Tax when selling rental property has a worked example, and you can read about selling part of a portfolio or selling with tenants in place.
The High Value Council Tax Surcharge
From 1 April 2028, owners of residential property in England worth £2 million or more will pay an annual surcharge on top of council tax. The owner pays, not the tenant, which matters to landlords with high-value lets. Budget 2026 confirmed the bands after a consultation:
| Property value | Annual surcharge |
|---|---|
| £2 million to £2.5 million | £2,500 |
| £2.5 million to £3.5 million | £3,500 |
| £3.5 million to £5 million | £5,000 |
| £5 million and above | £7,500 |
The Valuation Office Agency will carry out a targeted valuation exercise. A deferral scheme will let some owners delay payment until the property changes hands, under criteria still to be set out. The government expects fewer than 1% of properties to be affected.
Other Changes Landlords Should Know About
- Making Tax Digital for Income Tax. Landlords and sole traders with qualifying income over £50,000 have had to keep digital records and send quarterly updates since April 2026. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028. Budget 2026 said no late-submission penalty points will be applied to quarterly updates in the 2027 to 2028 tax year.
- Reporting of property income. Budget 2026 said the government will consult on expanding third-party reporting of property income data, which could mean more information reaching HMRC from letting platforms and agents.
- Stamp Duty on purchases. Purchase rates did not change in either Budget. Buyers of additional residential property, including investors buying a portfolio, still pay a 5% surcharge on top of the standard rates.
- Inheritance Tax. The nil-rate band and residence nil-rate band stay frozen to April 2031. From 6 April 2027, most unused pension funds and pension death benefits will count towards the estate, which can affect landlords planning how to pass on property.
- Dividends and savings. Landlords who hold property in a company and draw dividends pay 10.75% and 35.75% on ordinary and upper-rate dividends from April 2026. Savings income, including interest on sale proceeds left on deposit, is taxed at 24%, 44% and 49% from April 2027.
Frequently Asked Questions
What are the new tax rates for landlords from April 2027?
From 6 April 2027, property income in England, Wales and Northern Ireland is taxed at 24% (property basic rate), 44% (property higher rate) and 49% (property additional rate). Budget 2025 first set these at 22%, 42% and 47%, and Budget 2026 raised them by two more points.
Did the Budget change Capital Gains Tax on selling a rental property?
No. Neither Budget 2025 nor Budget 2026 changed the rates. Gains on residential property are taxed at 18% within your basic-rate band and 24% above it, after the £3,000 annual exempt amount, and must normally be reported and paid within 60 days of completion.
Will I still get tax relief on my buy-to-let mortgage interest?
Yes, as a tax credit rather than a deduction. Budget 2025 linked the credit to the new property basic rate from April 2027. With that rate now 24%, the credit is expected to be given at 24%. Confirm the position with your accountant once the legislation is final.
Does the property income tax rise apply in Wales?
The new rates apply in England, Wales and Northern Ireland. The government has said it will work with the Welsh and Scottish governments so that they can set their own property income rates under their fiscal frameworks.
Do the changes affect landlords who own property through a limited company?
Not directly. Companies pay Corporation Tax on rental profits, which stays at 19% to 25%. Shareholders who draw dividends pay the higher dividend rates in force since April 2026.
Official Sources
- Budget 2026: Overview of tax legislation and rates (HM Treasury and HMRC, 28 October 2026)
- Budget 2026: Annex A, rates and allowances
- Income Tax: changes to tax rates for property and savings income (HMRC, 29 October 2026)
- Budget 2025 (HM Treasury, 26 November 2025)
- Change to tax rates for property, savings and dividend income: technical note (HMRC, 26 November 2025)
- Additional council tax charge on high value properties (28 October 2026)
- Making Tax Digital for Income Tax: reducing the threshold to £20,000 from April 2028 (HMRC)
Figures checked against GOV.UK on 11 November 2026.
This article is general information for landlords in England and Wales and is not tax, legal or financial advice. Tax and legal treatment depends on your circumstances. Speak to a qualified accountant or solicitor before acting.