April 2027 Property Income Tax Changes: What Landlords Must Know

From 6 April 2027, the way rental income is taxed in the UK is changing in a way that hasn't happened in decades. For the first time, property income will be taxed at its own dedicated rates, separate from the rates that apply to your salary, pension or self-employment profits. If you're a landlord with any meaningful rental profit, this is very likely to increase your tax bill, and for some landlords the increase will be substantial. This guide explains exactly what's changing, why, who it hits hardest, and what you can realistically do about it before the rules land.

What's actually changing?

Today, in the 2026/27 tax year, your rental profit is simply added to your other income and taxed at the standard income tax rates: 20% basic rate, 40% higher rate and 45% additional rate (with the equivalent Scottish rates applying if you're a Scottish taxpayer). From April 2027, property income moves onto its own separate set of rates:

On the face of it, a two-percentage-point rise across the board might not sound dramatic. But two further changes amplify the impact considerably, and it's these knock-on effects that catch most landlords by surprise.

Change two: the Section 24 credit rate rises to match

Since April 2020, landlords haven't been able to deduct mortgage interest as an expense. Instead, they get a flat-rate tax credit (currently 20% of the interest paid) deducted from their final tax bill. From April 2027, that credit rate rises to 22%, in step with the new basic property rate. On its own this is a small improvement for landlords with mortgages. But it doesn't come close to offsetting the impact of the higher rates above it: a higher-rate taxpayer still pays tax on their rental profit at 42% while only receiving relief on their mortgage interest at 22%, a gap of 20 percentage points, even wider than the current 20-point gap between the 40% rate and the 20% credit.

Change three: the personal allowance ordering change

This is the change that catches the most people off guard, and it's worth understanding properly. Right now, your personal allowance (£12,570 for most people in 2026/27) is set against your total income as a whole, wherever HMRC's calculations land it most usefully for you. From April 2027, the allowance will be applied to your employment, pension and trading income first, and only the leftover (if any) will be available against your property income.

If your salary or pension already comfortably exceeds your personal allowance, this changes nothing for you in practice, your allowance was never going to reach your rental profit anyway. But if you have a modest salary, a part-time job, or you're retired with a smaller pension, you may currently be relying on some of your personal allowance to shelter part of your rental profit from tax. From April 2027, that portion of your allowance will be used up against your other income first, leaving less, potentially none, to set against your property income. The practical effect is that more of your rental profit becomes taxable, on top of it now being taxed at the new, higher rates.

Who is affected, and by how much?

Every landlord with taxable rental profit will see their basic rate rise from 20% to 22%, a relatively modest increase in percentage terms. Higher and additional-rate taxpayers face proportionally larger jumps (40% → 42% and 45% → 47%), and because rental profit is often the "top slice" of a landlord's income, many landlords will find a meaningful chunk of their rental profit taxed at these higher rates for the first time.

The personal allowance ordering change adds a second layer on top of this for landlords with modest other income, the group who, perhaps counter-intuitively, can see one of the largest proportional increases in their rental tax bill, simply because allowance they currently rely on disappears.

The only reliable way to know your own position is to run your actual numbers through both rule sets side by side. That's exactly what our 2027 Property Tax Change Calculator does: enter your rental income, expenses, mortgage interest and other income once, and see your 2026/27 bill and your projected 2027/28 bill next to each other, along with the extra amount you can expect to pay each year and each month.

What can you actually do about it?

There's no single answer that suits every landlord, and the right approach depends heavily on your individual circumstances, plans and risk appetite. That said, several broad strategies are worth understanding and discussing with a specialist:

• Pension contributions. Increasing pension contributions extends your basic-rate band, which can keep more of your rental profit taxed at the lower rate, and in some cases can also help restore personal allowance lost to the £100,000 taper.
• Reviewing your ownership structure. The gap between personal and limited company taxation widens further once these changes land, because companies aren't affected by either the new property rates or the Section 24 restriction. Incorporating isn't free or risk-free. See our Ltd Company vs Personal Calculator to compare your own figures, including the cost of transferring an existing portfolio.
• Timing of disposals and improvements. If you're planning significant capital works or considering selling a property, the timing relative to April 2027, and relative to your income in any given year, can make a real difference to your overall position.
• Joint ownership and allocation. If you own property with a spouse or civil partner, how income is split between you (including via a Form 17 election where ownership shares differ from the default 50/50) can spread profit across two sets of allowances and tax bands more efficiently.
• Specialist advice. These rules are new, the personal allowance ordering change in particular is easy to miscalculate, and the right strategy is genuinely individual. A property tax specialist can model your exact circumstances and flag options a general guide like this simply can't cover.

Is this definitely happening?

This guide reflects the policy as announced and currently expected to take effect from 6 April 2027. As with any future tax change, the precise detail could still be adjusted before implementation, for example at a Budget or Spring Statement between now and then. We'll update this guide, and the figures in our calculators, as soon as anything official changes. Given how far away the change still feels for some, but how significant the planning window can be (especially around incorporation decisions, which take time to execute properly), it's worth starting to think about your position now rather than waiting until the rules are imminent.