Landlords will pay more income tax on rental profits from April 2027. That is the headline from Chancellor John Healey’s first Budget, delivered on 28 October 2026. It proposes adding a further two percentage points to the property income tax rates already announced last year.
The Budget also confirmed details of the High Value Council Tax Surcharge and eased Making Tax Digital penalties for next year’s joiners. It made smaller changes to stamp duty, Capital Gains Tax reporting and company taxation too.
This guide sets out what changed, who it affects and when. It separates new announcements from measures already in the pipeline, and flags where legislation is still needed.
Where this applies: the income tax rates below apply to landlords in England, Wales and Northern Ireland. Scottish taxpayers pay separate rates, and the Scottish Parliament and the Senedd have powers to set their own property income rates. Landlords in Scotland or Wales should check the devolved position. The council tax surcharge and the possession rules covered later apply in England.
Budget 2026 landlord changes at a glance
| When | Change | Who it affects |
|---|---|---|
| Self Assessment returns filed from 28 October 2026 | Late-filing penalties stop building up once a missed property disposal return is reported through Self Assessment | Landlords who sold and missed the 60-day return |
| From 29 October 2026 | Change-of-control test added to SDLT group relief | Corporate property groups |
| 20 January 2027 | HMRC consultation on rental data from letting agents and deposit schemes closes | Letting agents and deposit schemes |
| 1 April 2027 | ATED charges rise by 3.5% | Companies holding residential property worth over £500,000 |
| 6 April 2027 | Property income tax rates rise to 24%, 44% and 49% (proposed) | Individual and partnership landlords |
| 2027/28 tax year | No penalty points for late MTD quarterly updates in the first year | Landlords joining MTD in April 2027 |
| 1 April 2028 | High Value Council Tax Surcharge begins, with deferrals and exemptions now confirmed | Owners of homes in England worth £2 million or more |
| April 2028 | Reform of how company distributions are taxed | Shareholders, including in property companies |
| April 2029 | More regular Self Assessment payments | Taxpayers who make payments on account |
Measures that need legislation remain subject to Parliament. Most will be legislated through Finance Bill 2026-27.
Rental income tax: higher rates from April 2027
From 6 April 2027, the Budget proposes taxing rental profits at 24%, 44% and 49%. That is four percentage points above today’s rates.
| Tax band | 2026/27 (now) | 2027/28 as legislated in 2025 | 2027/28 as proposed in Budget 2026 |
|---|---|---|---|
| Basic | 20% | 22% | 24% |
| Higher | 40% | 42% | 44% |
| Additional | 45% | 47% | 49% |
The Finance Act 2026 currently sets the 2027/28 property rates at 22%, 42% and 47%. Budget 2026 proposes replacing them through Finance Bill 2026-27. Until that Bill is passed, the higher rates are announced policy rather than law.
The new rates apply to individuals with property income, including landlords who let through a partnership. They do not apply to limited companies. Nothing changes for the current 2026/27 tax year.
What the rise means in practice
Tax is charged on rental profit, not gross rent. Profit is rent received less allowable expenses and allowances, and your other income decides which band that profit falls into.
As a simple illustration, a higher-rate taxpayer with £10,000 of rental profit pays £4,000 at today’s 40% rate. At the proposed 44% rate, that becomes £4,400, an extra £400 a year. On £30,000 of profit taxed entirely at the higher rate, the increase is £1,200 a year. These figures leave out mortgage interest, which is treated separately.
Mortgage interest relief
The restriction on finance costs stays. Individual landlords still cannot deduct residential mortgage interest from rental profit. Instead, they receive a tax reduction calculated at the property basic rate.
From 2027/28, that reduction is linked to the property basic rate: 22% under current law, or 24% if the Budget proposal is enacted. The existing statutory limits on relief still apply, so higher and additional rate landlords do not get relief at their top rate.
Allowances
The £1,000 property allowance is unchanged. The Budget triples the separate trading allowance from £1,000 to £3,000 from 6 April 2027, but that allowance covers trading income, not rent.
Limited-company landlords
Companies are outside the new property income rates. A company’s rental profits remain subject to Corporation Tax, at a main rate of 25% and a small profits rate of 19%, with marginal relief in between.
Corporation Tax is not the whole picture, though. Shareholders pay personal tax when they take money out of the company, for example as dividends. Dividend tax rates are 10.75%, 35.75% and 39.35% for 2026/27, and this Budget did not change them.
Three company-specific measures are worth noting:
- Company distributions reform: the government will reform how distributions and repayments of capital to individual shareholders are taxed. Draft legislation is due for consultation in 2027, with the changes taking effect from April 2028.
- ATED: Annual Tax on Enveloped Dwellings charges rise by 3.5% from 1 April 2027, in line with the usual inflation-linked uprating. ATED mainly applies to companies holding UK residential property worth over £500,000. Qualifying property rental businesses can claim relief, but must still file a return to do so.
- SDLT group relief: a targeted change for corporate groups buying property in England or Northern Ireland adds a change-of-control test. Relief can be withdrawn if the buying company changes control within three years. It applies to transactions from 29 October 2026.
Stamp duty: no change for buy-to-let purchases
The Budget did not change stamp duty rates for landlords buying property. The five-percentage-point surcharge on additional residential property in England and Northern Ireland remains.
Finance Bill 2026-27 will remove any SDLT charge on the rent payable under assured tenancies in England, with effect from 1 May 2026. It also removes the need to file an SDLT return solely because rent is payable under such a tenancy.
This fixes an unintended interaction with the Renters’ Rights Act tenancy reforms. It was first announced on 22 April 2026, and it is not a new cut on property purchases.
High Value Council Tax Surcharge (England)
Owners of residential property in England worth £2 million or more will pay an annual surcharge from 1 April 2028. Values are based on April 2026. The surcharge was announced at Budget 2025; this Budget confirmed how deferrals, discounts and exemptions will work.
| Property value (April 2026) | Annual surcharge |
|---|---|
| £2m to £2.5m | £2,500 |
| £2.5m to £3.5m | £3,500 |
| £3.5m to £5m | £5,000 |
| £5m and above | £7,500 |
Key points for landlords:
- It is charged to the owner, not the tenant, and collected alongside council tax.
- It applies property by property. A portfolio of lower-value homes worth over £2 million in total is not caught.
- A 100% premium applies where a property is substantially unfurnished and unoccupied for 12 months or more.
- The Valuation Office Agency will carry out valuations, and owners are expected to learn their band by autumn 2027.
Capital Gains Tax and Inheritance Tax
Capital Gains Tax rates are unchanged at 18% and 24%, and the annual exempt amount stays at £3,000.
The Budget did change how penalties work for missed property disposal returns. When you sell a UK residential property with tax to pay, you must still report and pay within 60 days of completion.
If you miss that deadline and later report the gain on your Self Assessment return, the separate property return obligation now ends at that point. Further late-filing penalties stop building up. This applies to Self Assessment returns filed from 28 October 2026 and does not cancel penalties already charged.
On Inheritance Tax, the Budget made a technical change to how liabilities are treated for assets held in trusts, with tighter anti-avoidance rules. “Property” here means trust assets generally, not rental property, so most landlords are not affected.
Making Tax Digital and HMRC reporting
A first-year penalty easement for April 2027 joiners
Landlords whose qualifying income was over £30,000 in the 2025/26 tax year must join Making Tax Digital for Income Tax from 6 April 2027. Qualifying income means gross rent plus any self-employment turnover, before expenses. Some exemptions apply.
The new announcement is that those joining in April 2027 will not get penalty points for late quarterly updates during 2027/28. Until now, that easement covered only the first group, who joined in April 2026.
The updates must still be submitted before the year-end return can be completed. The easement does not cover the tax return itself or late payment of tax. From April 2027, the points-based penalty regime also applies to all Self Assessment taxpayers, whether or not they are in MTD.
More regular Self Assessment payments from April 2029
Taxpayers who make payments on account will move to more regular, in-year payments from April 2029. Those with enough PAYE income may pay through their tax code. This changes when tax is paid, not how much, and the exact payment frequency is still to be decided.
Consultation on letting agent data
HMRC is consulting until 20 January 2027 on standing obligations for letting agents and tenancy deposit protection schemes to report rental income data. The obligations would fall on agents and schemes rather than landlords. It is a consultation, not a new requirement already in force.
If the tax changes mean you are considering selling
Some landlords will now review whether to keep letting. If you own a tenanted property in England, the rules on recovering possession changed on 1 May 2026, when the Renters’ Rights Act abolished Section 21 “no-fault” notices.
You can sell with the tenant in place. If you need vacant possession and the tenant does not leave voluntarily, Ground 1A is the Section 8 ground for landlords who intend to sell. It is a mandatory ground, but it comes with strict conditions:
- Notice: you must give at least four months’ notice.
- Timing: the notice cannot normally expire during the first 12 months of the tenancy.
- Re-letting restriction: If you rely on Ground 1 (moving in) or Ground 1A (selling), restrictions apply from the date the notice is served until 12 months after the date on which possession proceedings can first begin. During this restricted period, you must not generally re-let the property or market it to let. Breaching the restriction is an offence and can result in a financial penalty of up to £40,000 as an alternative to prosecution.
- Genuine intention: you must genuinely intend to sell, so keep evidence such as estate agent instructions.
An invalid notice can add months to a sale. If you are weighing up a sale, it pays to get the Section 8 notice right first time.
Key dates for landlords
| Date | What happens |
|---|---|
| 28 October 2026 | Penalty change for missed property disposal returns applies to Self Assessment returns filed from this date |
| 29 October 2026 | SDLT group relief change-of-control test applies |
| 20 January 2027 | Letting agent and deposit scheme reporting consultation closes |
| 1 April 2027 | ATED charges rise by 3.5% |
| 6 April 2027 | Proposed property income rates of 24%, 44% and 49% begin; MTD threshold falls to £30,000; points-based penalties apply to all Self Assessment taxpayers |
| 1 April 2028 | High Value Council Tax Surcharge begins in England |
| April 2028 | Company distributions reform takes effect; MTD threshold falls to £20,000 (already scheduled) |
| April 2029 | More regular Self Assessment payments begin |
Autumn Budget 2026: landlord FAQs
When do the new rental income tax rates start?
The proposed rates of 24%, 44% and 49% apply from 6 April 2027, the start of the 2027/28 tax year. They still need to pass through Finance Bill 2026-27. Nothing changes for the current 2026/27 tax year.
Does the tax rise apply if I only have one rental property?
Yes. The rates are not limited to portfolio or professional landlords. Whether you pay tax, and at what rate, depends on your rental profit and your other income.
Are limited-company landlords affected?
Not by the new income tax rates. Companies pay Corporation Tax on rental profits instead. Shareholders still pay personal tax when they take money out, and company distributions reform is due from April 2028.
Has stamp duty changed for buy-to-let purchases?
No. The five-percentage-point surcharge on additional residential property in England and Northern Ireland remains.
Is the £1,000 property allowance going up?
No. The property allowance stays at £1,000. It is the separate trading allowance that rises to £3,000 from April 2027.
Do I still get relief for mortgage interest?
Yes, as a tax reduction rather than a deduction from rental profit. From 2027/28, it is calculated at the property basic rate, which the Budget proposes setting at 24%.
Can I evict a tenant because I want to sell?
In England, you can use Ground 1A if you genuinely intend to sell. You must give at least four months’ notice, cannot normally use it in the first 12 months of the tenancy, and cannot re-let for a restricted period afterwards.
Need help with a tenancy or possession issue?
For advice on your own tax position, speak to a qualified accountant or tax adviser.
If the Budget changes your plans for a let property in England, Possession Proceedings can help with tenancy compliance, Section 8 notices, including Ground 1A, and possession claims. Getting the process right from the start avoids costly delays.
Related reading: Landlord checklist for 2026: what you must do now, what to watch and what can wait
This article provides general information based on Budget announcements and guidance available on 31 October 2026. Several measures still require legislation and may change. It is not financial, tax or case-specific legal advice.
