How To Prepare For Government Landlord Tax Hikes Coming In 2027 And Protect Your Income
Government landlord tax hikes refer to the two percentage point increase in property income tax rates confirmed for April 2027, raising the basic, higher and additional rates to 22%, 42% and 47%. Announced in the Autumn Budget 2025 and confirmed in Finance Act 2026, the change affects an estimated 2.4 million landlords.
Key Takeaways
- Property income tax rates rise by two percentage points from 6 April 2027, taking the basic rate to 22%, the higher rate to 42% and the additional rate to 47%.
- HMRC estimates that 2.4 million landlords, around 6% of taxpayers, will pay more tax as a result of the change by 2029 to 2030.
- The government has confirmed it made no single assessment of the combined cost to landlords of the tax rise and the Renters Rights Act reforms.
What Are the Government Landlord Tax Hikes?
The government landlord tax hikes are a set of tax rate rises confirmed for property, savings and dividend income, with the property income change taking effect from 6 April 2027.
- Property income tax rates rise by 2 percentage points across all three bands.
- Savings income tax rates rise by the same amount, also from April 2027.
- Dividend tax rates rose by 2 percentage points from April 2026, a year earlier.
- The changes were legislated through Finance Act 2026, which received Royal Assent on 18 March 2026.
Landlords with rental profits, savings interest or dividend income from a letting company face higher bills across all three areas.
New Property Income Tax Rates From April 2027
From 6 April 2027, unincorporated landlords in England, Wales and Northern Ireland pay income tax on rental profits at new property specific rates.
HMRC confirms the property basic rate rises to 22%, the property higher rate to 42% and the property additional rate to 47%, each two percentage points above the equivalent earned income rate.
| Tax band | Current rate | Rate from April 2027 |
|---|---|---|
| Property basic rate | 20% | 22% |
| Property higher rate | 40% | 42% |
| Property additional rate | 45% | 47% |
Finance cost relief for mortgage interest stays in place but moves to the new 22% property basic rate.
How Much More Tax Will Landlords Pay?
Worked example: A landlord with £20,000 of rental profit pays £400 more tax a year once the new rates apply.
- A basic rate landlord with £10,000 of rental profit pays £2,200 in tax from April 2027, up from £2,000 today, an increase of £200.
- A higher rate landlord with £20,000 of rental profit pays £8,400 in tax from April 2027, up from £8,000 today, an increase of £400.
- An additional rate landlord with £50,000 of rental profit pays £23,500 in tax from April 2027, up from £22,500 today, an increase of £1,000.
- Landlords with mortgages calculate finance cost relief at the new 22% property basic rate rather than the current 20%, which offsets part of the rise for geared portfolios.
The percentage rise looks small on paper, but for a basic rate landlord it represents a 10% relative increase on the rate itself.
Is the Landlord Tax Change Happening in 2026 or 2027?
The property income tax rate rise takes effect on 6 April 2027, not 2026, though a separate reporting change does begin in 2026.
Making Tax Digital for Income Tax became mandatory from April 2026 for landlords earning over £50,000, with the £30,000 to £50,000 band following from April 2027. This is a reporting change, not a rate change, though it is often confused with the tax rise itself because both measures land on landlords in the same few years.
Widely circulated claim: Landlord tax changes are happening in 2026.
Correct position: The property income tax rate rise takes effect from 6 April 2027. What starts in 2026 is Making Tax Digital reporting for higher earning landlords, a separate measure with its own timetable.
Source: HMRC, Changes to tax rates for property, savings and dividend income.
How the Personal Allowance Ordering Change Affects Landlords
From April 2027, your Personal Allowance is set against employment, trading or pension income before any property income, which can leave more of your rental profit fully taxable.
- Work out your total income from employment, trading, pension and property for the tax year.
- Your Personal Allowance is applied to employment, trading and pension income first.
- Any remaining property income is taxed at the new property rates with no Personal Allowance offset if the allowance is already used elsewhere.
- A landlord with £20,000 of employment income and £10,000 of property income has the full Personal Allowance set against employment, leaving the entire £10,000 of property income taxable at 22%.
Landlords who also rely on the pensioners income tax personal allowance freeze face a similar squeeze, as frozen thresholds and reordered allowances add to each other rather than working in isolation.
Why the Government Says the Tax Rise Is Fair?
The government argues the rise closes an unfair gap between tax paid on rental income and tax paid on wages, since landlords do not pay National Insurance on rental profit.
Financial Secretary to the Treasury Lord Livermore told the House of Lords that a landlord earning £25,000 currently pays close to £1,200 less tax than a tenant earning the same salary, purely because rental income sits outside National Insurance.
The government expects around two thirds of the extra revenue to come from the highest earning fifth of households. Shadow ministers and industry bodies dispute that framing, arguing the comparison ignores landlord costs such as maintenance and void periods.
Rental Property as a Pension Alternative
Many landlords built their portfolios as a retirement income source, and the 2027 changes reduce the net return on that strategy.
- Over 42% of landlords cite pension planning as a top reason for buying rental property, according to the English Private Landlord Survey.
- Rental profit taxed at 42% or 47% under the new rates leaves noticeably less income for landlords who treated property as a pension substitute.
- Landlords weighing property against other retirement options should also factor in the pension tax-free lump sum to be scrapped, as both changes reshape how retirement income is best structured.
- Incorporation remains one option for landlords wanting to shelter reinvested profit from the personal rate rise.
Government Admits No Combined Impact Assessment Was Made
The government has confirmed it carried out no single assessment of the combined cost to landlords of the property tax rise and the Renters Rights Act.
In a written parliamentary answer dated 30 July 2026, Baroness Taylor of Stevenage told the House of Lords that her department had made no assessment covering the cumulative cost of both measures together.
A separate Tax Information and Impact Note published alongside the Budget described the administrative burden of the tax rise alone as negligible. Several landlord groups dispute that characterisation, given the scale of the other regulatory changes landlords face at the same time.
Landlords Who Also Draw the State Pension Face a Double Squeeze
Landlords who rely on the state pension alongside rental income face pressure from two frozen or restructured thresholds at once, not just the property rate rise.
- The state pension itself sits close to the Personal Allowance, leaving little headroom before property income becomes taxable.
- The state pension tax threshold freeze means more of a retired landlord’s pension income is drawn into tax each year as the threshold fails to keep pace with inflation.
- Under the April 2027 ordering rules, the Personal Allowance is used against pension income first, leaving property income more exposed to the higher property rates.
- Landlords in this position rarely have the option to increase employment income to absorb the change, since retirement leaves little room to offset it elsewhere.
Will the Tax Rise Push Up Rents?
Industry bodies and the Office for Budget Responsibility both expect the tax rise to add some pressure to rents, though the scale of any increase is disputed.
The OBR’s Economic and Fiscal Outlook states that successive erosion of private landlord returns is likely to reduce rental supply over the longer run, which risks a steady rise in rents if demand continues to outstrip supply.
A Pegasus Insight poll of NRLA members found 46% of landlords plan to raise rents over the next 12 months because of the tax change, with 33% considering selling a property instead.
Not every analysis agrees that landlord tax changes translate directly into higher rents. Separate research into the 2016 mortgage interest relief reforms found no clear evidence that those changes raised rents in real terms, as landlords absorbed much of the cost themselves.
Other Tax Rises Landlords Face Under the Same Finance Act
The property income rate rise is one of several tax changes landlords face under Finance Act 2026, not an isolated measure.
- Dividend tax rates rose by 2 percentage points from April 2026, affecting landlords who take profit from a letting company
- Savings income tax rates rise by 2 percentage points from April 2027, alongside the property rate change
- A new High Value Council Tax Surcharge applies to properties worth over £2 million from April 2028
- Landlords holding cash reserves for property maintenance or deposits should also review the tax crackdown on savings accounts, as the same Budget raised savings tax rates alongside property income.
How Landlords Can Reduce the Tax Impact?
Review your ownership structure and income allocation now, since several planning options need time to put in place before April 2027.
- Consider transferring a share of a jointly held property to a lower earning spouse or civil partner to make fuller use of both Personal Allowances.
- Model whether incorporation suits your portfolio, since companies remain outside the 22% finance cost restriction that applies to personal ownership.
- Review succession and gifting plans well ahead of the change, including how they interact with the HMRC Inheritance Tax Changes 2027, since property held personally forms part of your estate.
- Speak to a tax adviser before April 2027 rather than after, since some restructuring options take several months to complete.
Gifting Rental Property to Reduce Future Tax Exposure
You can reduce future tax exposure on a rental property by gifting a share of it during your lifetime, though this carries its own tax consequences.
Gifting property is treated as a disposal for Capital Gains Tax purposes, so you may face a tax bill at the point of transfer even though no cash changes hands.
The Inheritance tax gift rules set out the seven year rule and reservation of benefit provisions, both of which affect whether a gift actually removes the property from your estate.
Section 24 mortgage interest relief does not apply once a property is fully gifted and no longer generates personal rental income for you.
Conclusion
Government landlord tax hikes bring property income tax rates to 22%, 42% and 47% from April 2027, alongside a Personal Allowance ordering change and a wider set of savings and dividend rises under the same Finance Act.
Landlords should review their structure, allowances and succession plans well before the deadline. Government landlord tax hikes mean higher bills for millions of landlords in 2027.
FAQ
What are the new tax rises for landlords?
Property income tax rates rise by 2 percentage points from April 2027, taking the basic, higher and additional rates to 22%, 42% and 47%. Savings income rates rise by the same amount at the same time, and dividend rates already rose in April 2026.
Is the landlord tax change happening in 2026 or 2027?
The rate rise itself takes effect from 6 April 2027. The date that sometimes causes confusion is April 2026, which is when Making Tax Digital reporting became mandatory for higher earning landlords, a separate and unrelated measure.
How can landlords reduce tax on rental income?
Several legitimate options exist, including spousal transfers, incorporation and reviewing finance costs. Each carries its own tax and administrative consequences, so professional advice before April 2027 is strongly recommended.
Do landlords pay National Insurance on rental income?
No, rental income is not subject to National Insurance contributions, unlike employment income. The government has cited this difference as its main justification for raising property income tax rates to narrow the gap with earned income.
Disclaimer: This content is for informational purposes only and does not constitute formal financial or legal advice; consult a qualified tax professional regarding your personal circumstances.
