Tax on Rental Income to Be Raise by 4% Points from April 2027

The UK government has announced a further 2 percentage point increase in tax on rental income from April 2027. Combined with the increase announced last year, the changes will raise property income tax rates by 4 percentage points compared with standard income tax rates.

The latest increase was announced in the 2026 Budget. It will raise the tax rates for individual landlords to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.

The government introduced separate tax rates for property income in its 2025 Budget. Those rates were initially set at 22%, 42% and 47%. The latest announcement adds another 2 percentage points to each band.

The changes will take effect from April 6, 2027. They will apply to property income in England, Wales and Northern Ireland. Scotland has separate powers to set income tax rates, while the government has also provided for Wales to exercise its relevant powers.

How Much Will the Tax Increase Raise?

The government expects the latest increase in property income tax to generate additional revenue for the Treasury. HM Revenue and Customs estimates that the measure will raise £35 million in the 2027-28 tax year and £575 million in 2028-29. The annual revenue is forecast to vary in subsequent years.

The increase will affect individuals and partnerships earning taxable rental income. Landlords who own properties through companies are subject to different tax rules.

Landlords Warn of Higher Rents

Property experts have warned that higher taxes could reduce landlords’ rental profits and make buy-to-let investments less attractive. Some property owners may consider selling their rental homes or leaving the market.

The National Residential Landlords Association has also warned that the changes could reduce rental property supply and push rents higher. Landlords may attempt to recover some of their additional costs by increasing rents adding pressure on tenants.