UK landlords face new Income Tax rules from 6 April 2027. Rental profits will face higher rates, and HMRC will change how it applies tax reliefs. The government announced the measures in the Autumn Budget 2025, and they are now part of the Finance Act 2026.
The changes bring separate tax rates for property income. They also change how HMRC works out tax for people with more than one source of income. If you are a landlord in England, Wales or Northern Ireland, review your tax position before the rules start.
What Are the New Property Income Tax Rates From April 2027?
Property income now falls under the standard Income Tax rates. From April 2027, it gets its own rates.
| Tax band | Current rate | From April 2027 |
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
Each band rises by two percentage points.
For landlords, this means you may owe more tax on rental profits. How much more depends on your taxable income, allowances and available reliefs. The Finance Act 2026 confirms the new rates for the 2027/28 tax year.
How Will Income Tax Calculation Rules Change?
The higher rates are not the only change. HMRC will also change the order in which it taxes income and uses general allowances.
From April 2027, HMRC will tax income in this order:
- Employment, self-employment and other non-property income
- Property income
- Savings income
- Dividend income
General allowances and reliefs must first reduce income outside property, savings and dividends, where possible.
Here is an example. Say you earn a salary and rental income. HMRC applies your Personal Allowance to your salary first. Any unused amount can then reduce other eligible income.
This could affect anyone with several income sources. Reliefs tied to a specific type of income still follow their own rules.
What Happens to Mortgage Interest Tax Relief?
Landlords with residential mortgage finance costs will also see a change. Today, eligible finance cost relief is worked out at the basic Income Tax rate of 20%. From April 2027, it rises to the new property basic rate of 22%.
The current limits on finance cost relief still apply.
Some rules stay the same:
- The property allowance
- The Rent a Room Scheme
- The rules for carried-forward property losses
Who Will the New Property Tax Rules Affect?
The changes mainly affect individuals who get taxable property income, including landlords and buy-to-let investors. If you earn both rental income and a salary, pay close attention to the new calculation order.
The new property rates apply to England, Wales and Northern Ireland. Scotland has separate arrangements for property income tax rates. The reform does not create a new reporting system. Self-Assessment continues, along with any Making Tax Digital rules that apply to you.
What Should Landlords Do Before April 2027?
Landlords should review three things now:
- Their expected rental profits
- Their mortgage finance costs
- Their other income
Ignoring the new rates could lead to wrong tax estimates and unexpected bills. Also check how the revised allowance rules may affect your overall Income Tax bill. Early tax planning helps you see your likely tax position before the new tax year starts, and reviewing your cash flow against higher tax bills is a sensible next step.
How Can Lanop Help Landlords Prepare?
The new rules make accurate tax calculations more important for property owners. Lanop Business & Tax Advisors can help you review your rental income, assess available reliefs and prepare for the April 2027 changes.
With professional tax advice, you can understand your duties and plan with confidence. For guidance on the upcoming changes, contact Lanop Business & Tax Advisors today.
