UK Government Landlord Tax Hikes By 2% Across All Bands

Quick Answer: Yes, landlords are getting stung again. From 6 April 2027, anyone letting property in England, Wales or Northern Ireland will pay an extra 2% income tax on their rental profits. Rates will jump to 22%, 42% and 47%. And no, it’s not a rumour. It’s already law.

Brace yourselves, buy-to-let crowd. The government landlord tax hikes were unveiled by then-Chancellor Rachel Reeves at Budget 2025 on 26 November 2025. The Finance Act 2026 made it official on 18 March 2026. So the clock’s ticking. You’ve got under seven months.

What are the Government Landlord Tax Hikes?

In simple words, rent is being taken out of the wages-and-pensions pot and given its own tax rates.

The reasoning’s in HMRC’s technical note on GOV.UK. People who earn from assets don’t pay National Insurance on that cash. Workers don’t. So landlords (and savers) have been paying less tax overall, and the extra 2% is the Treasury’s way of balancing things out a little.

The bands don’t budge, but the order does. The taxman now takes your wages, pension and trading income first. Rent comes next. Savings and dividends go last. Oh, and your personal allowance goes on the non-rental stuff first.

Picture someone on a £30,000 salary with £3,000 of rental profit. Right now, they’d hand over £600 on that rent. From April 2027? £660.

The House of Commons Library estimates that the combined changes to property, savings and dividends will bring in around £2.3 billion a year between 2028/29 and 2030/31.

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How Much More Will Landlords Pay?

For most, it’s hundreds, not thousands. Make £20,000 profit from renting, and you’ll cough up an extra £200 as a basic-rate taxpayer. Higher rate? Make that £400.

Cribs Estates points out that not every landlord pays the top rate on every penny of rent. Your other income, losses and reliefs all shape your final bill. Got old property losses carried forward? They still go against property income.

What Happens to Mortgage Interest Relief?

Rule Section 24 has been winding landlords up since 2020. It stops individual landlords from treating mortgage interest as a cost. Instead, you get a basic-rate tax credit.

The silver lining? From April 2027, that credit rises from 20% to 22%. Pay £10,000 in interest, and that’s £200 back. Don’t pop the champagne, though. Higher-rate landlords still claw back just 22% while paying 42% on their profits.

Who Is Covered and Who Isn’t?

Scottish landlords, you can breathe (for now). You pay Scottish income tax rates, so the rise doesn’t hit you automatically, although the Scottish Government may cook up its property rates later on. Wales will be included from April 2027, but the Senedd will gain powers to set its own rates further down the road.

Living overseas? Tax taken under the Non-Resident Landlords Scheme will be at the new 22% rate.

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Other Tax Changes Squeezing Landlords

As if one hike wasn’t enough.

Then there’s the freeze. Nobody shouts about it, but it bites. David Herd of Champion Accountants flags that around 500,000 extra people tipped into the higher-rate band between 2024/25 and 2025/26. The total’s now above seven million. More landlords could be next.

Should You Move Into a Limited Company?

It’s the question on every landlord forum. Companies pay corporation tax at 19% on profits up to £50,000 and 25% above £250,000. Plus, they can deduct mortgage interest in full. Tempting, right?

Hold your horses. Shifting a property into a company counts as selling it at market value. Cue a possible CGT bill and the 5% Stamp Duty surcharge. You’ll likely need a pricier new mortgage too. And since 6 April 2026, you have to claim incorporation relief on your tax return. You’ve got to claim it on your tax return.

Fancy something simpler? Moving a share of a property to your husband, wife or civil partner is usually CGT-free. If they’re a basic-rate taxpayer, you could save a significant amount.

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Can Landlords Just Raise the Rent?

Easier said than done. Rents are already very high. Figures from the ONS put the average UK private rent at £1,393 a month in the 12 months to July 2026, up 3.7%. Squeeze tenants too hard, and you’ll face empty months and missed payments. What you pocket matters more than the headline rent.

What Happens Next?

All eyes are on Chancellor John Healey’s first budget on 28 October 2026. The NRLA wants Capital Gains Tax to allow for inflation. In its budget submission, picked up by Property118, it said, “The purpose of the reform is to prevent inflation from being taxed as a genuine gain, not to shelter real increases in value from CGT.”

Our tip is to not leave it until spring. Book in with an accountant now.

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FAQs

1. When will the new landlord tax rates apply?
   Ans: On 6 April 2027, day one of the 2027/28 tax year. It’s already law.

2. How much is landlord tax going up?
   Ans: Two percentage points for all rates. The basic rate rises to 22%, the higher rate to 42%, and the additional rate to 47%.
3. Are Scottish landlords affected?
   Ans: Not automatically. Scotland sets its own income tax rates, and Holyrood may bring in separate property rates later.

4. Do limited company landlords pay the new rates?
   Ans: Nope. Companies pay corporation tax instead. But dividends you take out have cost more since April 2026.

5. Do landlords still get mortgage interest tax relief?
   Ans: Yes. Individual landlords get a tax credit, which rises from 20% to 22% in April 2027. Companies can still deduct the lot.

6. Is the Rent a Room Scheme changing?
   Ans: No. It stays the same, as does the £1,000 Property Allowance.

Sources & References:

• Champion – Around 500,000 extra people tipped into the higher-rate band between 2024/25 and 2025/26.
• Cribs Estates – Not every landlord pays the top rate on every penny of rent.
• Property118 – The purpose of the reform is to prevent inflation from being taxed as a genuine gain, not to shelter real increases in value from CGT.
• GOV.UK – People who earn from assets don’t pay National Insurance on that cash.