Autumn Budget 2026: What the 24% Property Income Tax Means for Landlords

The Autumn Budget 2026 announced further changes to the taxation of rental income, with an additional two-percentage-point increase in property income tax rates planned from April 2027, on top of the increase announced in the previous Budget.

For individual landlords, the combined changes could result in property income tax rates that are four percentage points higher than the standard income tax rates previously applied to rental profits.

These changes make it increasingly important for landlords to review their rental income, allowable expenses, mortgage finance costs and overall tax position.

In this guide, we explain the proposed changes, illustrate their potential financial impact and outline practical steps landlords can take to prepare.

What Was Announced

The Autumn Budget 2025 announced separate income tax rates for property income, set two percentage points above the existing standard rates from April 2027.

The Autumn Budget 2026 announced a further two-percentage-point increase, bringing the proposed property income tax rates to 24%, 44% and 49% from the 2027/28 tax year.

These rates apply to the relevant taxable property income falling within each income tax band. The actual amount of tax payable will depend on the landlord’s overall taxable income, available allowances and applicable reliefs.

From April 2027, rental profits will be taxed at:

Tax band	Rate today (2026/27)	Rate from April 2027
Basic rate	20%	24%
Higher rate	40%	44%
Additional rate	45%	49%

The same increase applies to savings income. The government said the change would not affect 84% of income taxpayers, and expects the property element alone to raise around £400 million a year from 2028/29.

The proposed property income tax changes primarily affect individual landlords and other individuals receiving taxable property income.

Landlords who hold rental properties through a limited company are generally subject to corporation tax on the company’s taxable profits rather than personal income tax on rental profits.

The application of income tax rules can vary across the UK. Scotland has separate income tax rates and bands for non-savings, non-dividend income, while Wales has devolved income tax arrangements.

Landlords in Scotland and Wales should therefore check how the property income tax changes apply to their individual circumstances and tax residence before calculating their future liabilities.

How Much More Will Landlords Pay?

The extra tax depends on your rental profit and your tax band. Here are some simple examples, assuming all the rental profit falls in one band:

Annual rental profit	Tax band	Tax today	Tax from April 2027	Extra each year
£8,000	Basic rate	£1,600	£1,920	£320
£12,000	Higher rate	£4,800	£5,280	£480
£25,000	Higher rate	£10,000	£11,000	£1,000

The figures above are simplified illustrations showing the difference between the current and proposed property income tax rates.

They assume that the full amount of taxable rental profit falls within the stated income tax band and that no additional allowances or reliefs affect the calculation.

In practice, a landlord’s tax liability will depend on their total taxable income, other sources of income, allowable property expenses, available allowances and the treatment of residential property finance costs.

Where rental profits fall across more than one tax band, different rates may apply to different portions of the income.

Landlords should therefore calculate their expected tax liability using their complete financial circumstances rather than relying solely on these examples.

If you run short-term or serviced accommodation, the change matters too. The furnished holiday lettings tax regime was abolished in April 2025, so profits from holiday lets and serviced accommodation are now generally taxed as ordinary property income, at the same new rates.

How Mortgage Interest Affects Your Tax Bill

For individual landlords with residential rental properties, mortgage interest and other qualifying finance costs are generally not deducted directly from rental income when calculating taxable property profits.

Instead, eligible landlords may receive a basic-rate tax reduction, normally calculated at 20% of qualifying finance costs, subject to statutory restrictions.

This means that the tax payable on rental income may differ significantly from a simple calculation based on rental profit alone.

Landlords should review their mortgage interest statements and other allowable expenses when estimating the impact of the new property income tax rates.

What the OBR Says About Rents

The Office for Budget Responsibility (OBR) has highlighted the potential impact of higher property income taxes on landlords’ investment returns and the wider rental market.

Higher taxation may reduce the financial attractiveness of buy-to-let investment, particularly for landlords already facing increased mortgage costs, maintenance expenses and regulatory obligations.

Over time, changes in landlord investment decisions could affect the supply of rental properties and place upward pressure on rents.

However, the impact on individual rental markets will depend on local housing supply, tenant demand, affordability and wider economic conditions.

Landlords should therefore review their property performance and local market conditions rather than assuming that higher taxes can automatically be passed on to tenants.

Making Tax Digital Also Arrives in April 2027

From 6 April 2027, Making Tax Digital for Income Tax will extend to qualifying sole traders and landlords whose combined gross income from self-employment and property exceeded £30,000 in the 2025/26 tax year.

Qualifying income is calculated before deducting business expenses. It is based on the relevant gross rental income and self-employment turnover, rather than taxable profits.

Affected taxpayers will need to maintain digital records and submit quarterly updates to HMRC using compatible software, followed by their annual tax return.

The government has also announced transitional relief from specified late-submission penalty points for quarterly updates during the 2027/28 tax year. However, this does not remove the obligation to submit updates or meet other tax requirements.

Landlords should review their income figures and prepare their digital accounting records well before April 2027.

Our sister company, Legacy Accounting, explains the details in its guide to Making Tax Digital for landlords.

Seven Steps Landlords Should Take Now

The new rates do not start until April 2027, which gives you time to plan.

1. Work Out Your Real Numbers

Review the financial performance of each rental property by calculating rental income, allowable expenses, mortgage payments, maintenance costs, insurance, letting agent fees and expected void periods.

It is important to distinguish between cash flow and taxable rental profit. For example, mortgage capital repayments affect cash flow but are not deductible when calculating rental profits.

Once you understand the financial position of each property, estimate how the new property income tax rates could affect your overall tax liability.

This will help identify which properties remain profitable and where improvements may be needed.

2. Make Sure Every Allowable Expense Is Claimed

Claiming all eligible rental expenses can help reduce your taxable property profits.

Allowable expenses may include letting and property management fees, qualifying repairs and maintenance, landlord insurance, accountancy fees, certain service charges and eligible replacement domestic items.

However, not every property-related expense qualifies for an immediate income tax deduction. Capital improvements, mortgage capital repayments and certain other costs are treated differently for tax purposes.

Landlords should maintain accurate records and supporting invoices to ensure that eligible expenses are correctly identified and claimed.

3. Review your rents against the market

Many landlords keep rents well below market level for long-standing tenants. That can be a sensible choice, but it is worth knowing the gap. A current rental valuation shows what your property could achieve, and lets you make an informed decision rather than a guess.

4. Cut your void periods

An empty month can wipe out much of a year’s tax saving. Professional marketing, quick referencing and planned renewals all help keep a property let. A good letting agent can often shorten the gap between tenancies considerably.

5. Think about how you own your properties

Some landlords are now asking whether to hold properties in a limited company rather than personally. A company pays corporation tax rather than the new property income rates, and mortgage interest can usually be deducted as a business cost. However, moving existing properties into a company can trigger capital gains tax and stamp duty, mortgage rates are often higher, and taking money out of the company brings dividend tax. It is a decision to make with proper tax advice, not on the back of a headline.

6. Get Ready for Making Tax Digital

If your combined qualifying income from property and self-employment exceeded £30,000 in the 2025/26 tax year, you may need to comply with Making Tax Digital for Income Tax from 6 April 2027, unless an exemption applies.

Review your income, select compatible accounting software and begin organising your rental records digitally.

Preparing early will help you manage quarterly reporting requirements and reduce the risk of errors or missed deadlines.

7. Decide how hands-on you want to be

Rising costs and tighter rules make self-management harder to justify for many busy landlords. Full management covers rent collection, inspections, maintenance, compliance and renewals, and the fees are an allowable expense. Our property management packages set out exactly what each level includes, so you can compare the cost against the time and risk you save.

What About Selling?

Some landlords will decide that the numbers no longer work and choose to sell. If you are considering it, timing and preparation matter. Capital gains tax, the state of the property, whether it is sold with tenants in place and local demand all affect what you take home.

If you would like to know what your property is worth, you can book a free valuation with our team. We can also talk you through whether selling, holding or restructuring makes more sense for your situation.

Is Buy-to-Let Still Worth It?

Buy-to-let property can still offer opportunities for long-term investment, rental income and potential capital growth. However, rising operating costs, regulatory requirements and changes to property income taxation mean landlords need to assess their investments carefully.

The profitability of a rental property depends on several factors, including rental yield, mortgage costs, maintenance expenses, void periods, local tenant demand and the landlord’s personal tax position.

Higher property income tax rates may reduce net returns for some individual landlords, particularly those paying higher or additional rates of income tax.

Landlords considering new investments should assess both expected rental income and long-term capital growth, while allowing for potential changes in interest rates, property values and taxation.

At Legacy PSL, we support landlords and property investors with rental valuations, yield assessments and property management services. Explore our investor services to learn more.

How Legacy PSL Can Help

Legacy PSL works with landlords across Oxfordshire, Berkshire, Northamptonshire and South Yorkshire. Whether you want a rental valuation, a review of your current lettings, full management or help selling, our team can help you plan for April 2027 with confidence.

Contact us to talk through your properties.

Frequently Asked Questions

What did the Autumn Budget 2026 announce for landlords?

The Autumn Budget 2026 announced a further two-percentage-point increase in property income tax rates from 6 April 2027, bringing the proposed basic, higher and additional property rates to 24%, 44% and 49% respectively. These changes follow the two-percentage-point increase announced in the previous Budget.

When do the new property income tax rates start?

The new property income tax rates are scheduled to take effect from 6 April 2027, the beginning of the 2027/28 tax year.

Do the changes affect landlords with a limited company?

The new personal property income tax rates do not directly apply to rental profits earned by limited companies. Companies generally pay corporation tax on taxable rental profits.

However, landlords should also consider the potential tax consequences of extracting profits from their company through dividends or salary.

Will rents go up because of the Budget?

Higher property income taxes may influence landlords’ investment decisions and could contribute to upward pressure on rents over time. However, rental increases are not guaranteed and will depend on local market conditions, housing supply, tenant demand and applicable tenancy rules.

Does the tax rise apply to serviced accommodation and holiday lets?

Generally, yes. The furnished holiday lettings regime ended in April 2025, so short-let profits are now usually taxed as property income at the same rates as standard lets.

Do I need to use Making Tax Digital in 2027?

If your combined qualifying gross income from property and self-employment exceeded £30,000 in the 2025/26 tax year, you will generally need to use Making Tax Digital for Income Tax from 6 April 2027, unless an exemption applies.

Are letting agent fees tax deductible?

Yes. Letting and property management fees incurred wholly and exclusively for a rental business are generally allowable expenses when calculating taxable rental profits, subject to the relevant tax rules.

Sources

• Mortgage Solutions: Autumn Budget 2026 property income tax rise, 28 October 2026
• Sage: Autumn Budget 2026, what it means for your business

This article is for general information only and is not tax advice. Speak to a qualified accountant about your own circumstances.