{"id":7301,"date":"2026-11-05T12:12:02","date_gmt":"2026-11-05T12:12:02","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=7301"},"modified":"2026-11-05T12:12:05","modified_gmt":"2026-11-05T12:12:05","slug":"increased-tax-on-rental-income-what-does-this-mean-for-landlords-and-property-investors","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/increased-tax-on-rental-income-what-does-this-mean-for-landlords-and-property-investors\/","title":{"rendered":"Increased tax on rental income: What does this mean for landlords and property investors?"},"content":{"rendered":"

The Chancellor has announced a four-percentage-point increase in the tax charged on property income, doubling the rise landlords previously expected.<\/p>\n

<\/p>\n

From April 2027, many property investors and landlords will face higher tax bills, particularly those who own assets in their own name.<\/p>\n

With higher taxes set to have wide-reaching consequences, discussing planning strategies with an accountant can help to mitigate the financial impact.<\/p>\n

What has changed in the 2026 Budget?<\/strong><\/h3>\n

Last year\u2019s Autumn Budget announced a two-percentage-point increase in tax rates paid on property income.<\/p>\n

However, the changes introduced in the Chancellor\u2019s latest speech mean this has now been raised to four percentage points.<\/p>\n

From 6 April 2027, individual landlords in England, Wales and Northern Ireland will pay Income Tax on rental profits under distinct property Income Tax rates, as follows:<\/p>\n\n\n\n\n
Type of income<\/strong><\/td>\nBasic rate<\/strong><\/td>\nHigher rate<\/strong><\/td>\nAdditional rate<\/strong><\/td>\n<\/tr>\n
Property income<\/td>\n24 per cent (currently 20 per cent)<\/td>\n44 per cent\u00a0(currently 40 per cent)<\/td>\n49 per cent\u00a0(currently 45 per cent)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Scottish landlords should evaluate their tax position separately, as devolved tax arrangements may apply north of the border.<\/p>\n

What does this mean in practice?<\/strong><\/h3>\n

For every \u00a310,000 of taxable rental income, a landlord will pay \u00a3400 more tax than under the current rates.<\/p>\n

Under the Section 24 rules, individual landlords can no longer deduct mortgage interest from their rental income, as they instead receive a tax credit at the rate of 24 per cent.<\/p>\n

While the additional mortgage interest relief may lessen the impact for basic-rate landlords, higher- and additional-rate taxpayers will feel the tax rise most acutely.<\/p>\n

The gap between the tax they owe on rental profit and the relief they get on finance costs will only widen from April 2027.<\/p>\n

Time to consider moving your property portfolio into a limited company?<\/strong><\/h3>\n

The heightened tax rates on property income impact unincorporated landlords, including those who own assets in their own name, joint owners and partners in property partnerships.<\/p>\n

On the other hand, landlords who hold property through a limited company are not directly affected by the rate changes, as they are charged Corporation Tax at between 19 per cent and 25 per cent.<\/p>\n

Although incorporating rental assets can be effective for mitigating the upcoming Income Tax hikes, landlords may trigger Capital Gains Tax and Stamp Duty for moving properties into a company.<\/p>\n

Extracting profits from a company can also create liabilities, with the Dividend Tax rates rising in April 2026.<\/p>\n

Instead of rushing to change ownership structures to offset the upcoming rate change, landlords should carefully review their portfolio to assess the best course of action.<\/p>\n

What should landlords do now?<\/strong><\/h3>\n

With the new rates just over five months away, now is a good time to:<\/p>\n

    \n
  • Consider whether rental income could be shared with a spouse or civil partner who pays a lower rate<\/li>\n<\/ul>\n
      \n
    • Review the timing of rental income and allowable expenses around 5 April 2027<\/li>\n<\/ul>\n
        \n
      • Weigh up whether a limited company structure makes sense, allowing for the stamp duty costs of transferring property<\/li>\n
      • Make sure every allowable expense is claimed<\/li>\n<\/ul>\n

        Speak to an accountant<\/strong><\/h3>\n

        While the changes are likely to be unwelcome to many landlords, effective planning can help minimise the financial fallout.<\/p>\n

        Our accountants can help review your portfolio and forecast how the rate changes will impact your rental income, advising whether you may benefit from switching ownership structure.<\/p>\n

        Concerned about how these changes may impact you and your property portfolio? Please get in touch with our property tax specialists.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

        The Chancellor has announced a four-percentage-point increase in the tax charged on property income, doubling the rise landlords previously expected.<\/p>\n","protected":false},"author":2,"featured_media":7304,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,7],"tags":[],"_links":{"self":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7301"}],"collection":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=7301"}],"version-history":[{"count":1,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7301\/revisions"}],"predecessor-version":[{"id":7302,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/posts\/7301\/revisions\/7302"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media\/7304"}],"wp:attachment":[{"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=7301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=7301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bainesjewitt.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=7301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}