Property income tax rates from 6 April 2027

acrenvo.com/guides/property-income-tax-rates-2027, last reviewed 31 October 2026

Harriet is fictional, but plenty of landlords will recognise her. She works full time on a salary and lets one flat in England, which she bought with a buy-to-let mortgage. Each January she fills in her Self Assessment return, pays the tax on her rental profit and gets on with the year. She had heard that landlords would pay more tax from 2027, but not how much more, or whether it touched the mortgage interest she already gets some relief on.

This guide walks through what the government has published about the change, in the order Harriet would want to read it. It keeps to the official wording wherever the detail matters, and it uses her figures only as an illustration.

What is changing and from when

At the moment, rental profit is taxed at the same rates as a salary or self-employed profit. That changes on 6 April 2027. In HMRC’s words, “The government is creating separate tax rates for property income.” For the 2027 to 2028 tax year, the rates are:

• the property basic rate of 22%
• the property higher rate of 42%
• the property additional rate of 47%

HMRC’s impact note describes this as an increase of 2 percentage points at each of the three rates. The same three rates are written into section 7 of the Finance Act 2026. The definition of property income itself does not move: “The changes apply to property income for Income Tax purposes, the definition of which remains unchanged.”

Those are the rates in law today, but the Budget on 28 October 2026 announced higher ones for the same year. The government’s overview says: “From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%.” It is announced for Finance Bill 2026-27, so it is not law yet, and the figures in the rest of this guide, including Harriet’s example, use the rates the Finance Act 2026 sets. Our Budget 2026 reading sets out the announcement and what else changed.

There is a second change that matters for someone like Harriet, who has a salary as well as rent. Income Tax is worked out in a set order, and property income gets its own place in it. Property income will now be taxed after employment, trading and other income but before savings and dividend income. The personal allowance follows the same order. This will mean that any available allowances or reliefs (including the personal allowance) are deducted from income which is not property, savings or dividend income first. In practice, Harriet’s personal allowance is used against her salary first, and her rental profit is taxed after that at the property rates.

Who the new rates apply to

The impact note sets out who is likely to be affected, and landlords come first in the list: “This measure will affect individuals who receive income from letting property, individuals who earn interest from their savings, and individuals who receive distributions, including dividend income, and participators in close companies who receive loans or benefits from those companies.” Some things stay as they were. The Rent a Room Scheme remains unchanged, and the property allowance also remains unchanged. Carried forward property losses must still be set against property income.

What is different in Scotland and Wales

Where you pay tax matters here, because Scotland and Wales already set some of their own Income Tax rates. HMRC’s technical note says: “The separate rates of tax on property income will apply to England, Wales and Northern Ireland. The government will engage with the devolved governments of Scotland and Wales to provide them with the ability to set property income rates in line with their current Income Tax powers in their fiscal frameworks.”

The impact note adds that “the legislation will also amend the Scotland Act 1998 and Government of Wales Act 2006 for the Scottish Parliament and the Senedd to be provided with the ability to set devolved property Income Tax rates.” Those powers are in section 8 of, and Schedule 2 to, the Finance Act 2026. They needed a separate start date, which the Treasury set in the Finance Act 2026 (Scottish and Welsh Property Income Rates) (Appointed Day and Tax Year) Regulations 2026 (SI 2026/1023). The Regulations were made on 14 September 2026 and brought those provisions into force on 16 September 2026. Their explanatory note says: “They also appoint the tax year 2027-28 as the first tax year in relation to which the amendments made by section 8 and Schedule 2 have effect.”

So from the 2027 to 2028 tax year, the Scottish Parliament can set property rates for Scottish taxpayers, and the Senedd can set a Welsh rate that is used to work out the Welsh property basic, higher and additional rates. The sources we read do not say what rates either of them will set. If you pay Income Tax as a Scottish or Welsh taxpayer, it is worth watching for their announcements before the tax year starts. Harriet lives and lets in England, so the rates above are the ones that apply to her.

What happens to relief for mortgage interest

Mortgage interest on a let home is one of the residential finance costs that the technical note describes. The way relief works does not change: under the current rules, individuals with residential finance costs cannot deduct finance costs as an expense in calculating profits from their property business. Instead, the relief comes off the tax bill as a reduction. What changes is the rate. In the note’s words, “Taxpayers will continue to receive relief in this way but this will be at the property basic rate from 2027 to 2028.” That rate is 22%.

What it means for a landlord’s own figures

It helps to see the rates with numbers attached. The figures below are made up to show how the arithmetic fits together. They are not a calculation of anyone’s tax, and real returns involve allowances, other income and rules this example leaves out.

Someone whose rental profit reaches the higher or additional rate bands would see those parts taxed at 42% or 47%, while the relief for finance costs stays at the property basic rate. HMRC’s technical note includes a fuller example that also covers savings and dividends, and an accountant can work through your own figures with you.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

How it sits alongside Making Tax Digital

The 2027 to 2028 tax year is also when Making Tax Digital for Income Tax reaches a wider group of landlords, so for some readers the two changes arrive together. They are separate changes, though. HMRC’s technical note says: “These changes do not affect Making Tax Digital for Income Tax, which will transform how sole traders and landlords manage their tax.” The impact note adds: “There are no changes to reporting requirements due to these measures.” The new rates change the tax worked out on your property profit, not the records you keep or the updates you send.

If you are not sure whether MTD reaches you in the same year, the guide to the April 2027 MTD step explains who it catches and when the first quarterly updates fall.

Questions landlords ask about the new property rates