How much tax do landlords pay on rental income, and how much more from April 2027?

In England, Wales and Northern Ireland, individual landlords currently pay income tax on rental profit at the ordinary income tax rates, but announced property-income rates from April 2027 would tax rental profit at higher dedicated rates. Scotland is different: Scottish taxpayers pay Scottish income tax rates on rental profit, and no separate Scottish property-income rate has yet been set.

What did the 2026 Budget change for landlords?

The 2026 Budget announced that landlords in England, Wales and Northern Ireland will pay 24%, 44% and 49% on property income from 6 April 2027, replacing the earlier Budget 2025 figures of 22%, 42% and 47%, but those higher 2026 Budget rates are still announced policy rather than enacted law.

The Budget document says: “From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%.” It also says: “These rates will apply across England, Wales and Northern Ireland.” For 2026/27, the current year before the rise, property income is still charged at ordinary income tax rates: “For tax year 2026 to 2027, property income is charged at the main rates of income tax.”

Budget 2026 also deferred Making Tax Digital for some taxpayer groups, mentioned a private rented sector landlord registration fee without setting the Budget amount, and removed SDLT on rent paid under assured tenancies in England from 1 May 2026.

How much more tax will landlords pay on rental income from April 2027?

From April 2027, landlords in England, Wales and Northern Ireland are due to pay 4 percentage points more on rental profit than today — 24% instead of 20%, 44% instead of 40%, and 49% instead of 45% — but the final 24/44/49 rates still need Finance Bill 2026-27 legislation because Finance Act 2026 currently contains the earlier 22/42/47 rates.

Finance Act 2026 says only that “For the tax year 2027-28 the property rates of income tax are as follows—”, while Budget 2026 later announced: “From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%.” The 2027 rise has two layers: Budget 2025 had already increased property income tax by 2 points from April 2027, and Budget 2026 added another 2 points.

A landlord with £10,000 of rental profit in the basic-rate band would therefore pay £2,400 instead of £2,000, an extra £400 a year; the same £10,000 in the higher-rate band would cost £4,400 instead of £4,000, an extra £400; and in the additional-rate band it would cost £4,900 instead of £4,500, also an extra £400.

What did the 2025 Budget change for landlords?

The 2025 Budget created the separate property-income tax rates due from April 2027 and set them at 22%, 42% and 47%, but Budget 2026 later raised those announced rates to 24%, 44% and 49% for England, Wales and Northern Ireland.

The 2025 policy paper said: “From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%.” That means the landlord tax 2025 Budget announcement was the first step away from taxing rental profit at ordinary income tax rates; it was not the final figure now being used for 2027/28 planning.

In short, Budget 2025 created the dedicated property rates and added 2 percentage points to each band from April 2027. Budget 2026 then added a further 2 points, so landlords comparing the 2025 and 2026 Budgets should use 22/42/47 as the earlier announcement and 24/44/49 as the later announced position.

How much tax do you pay on rental income?

In England, Wales and Northern Ireland for 2026/27, an individual landlord pays tax on rental profit at 20%, 40% or 45% after allowable expenses and any available personal allowance; from April 2027 the announced property-income rates are 24%, 44% and 49%.

HMRC’s rental-income guidance states the basic rule: “You must pay tax on any profit you make from renting out property.” The ordinary 2026/27 income tax bands use a £12,570 personal allowance, with the GOV.UK rates page saying: “The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.” In practice, tax on rental income is charged on profit, not gross rent: rent received minus allowable expenses, with residential mortgage interest handled through the finance-cost tax-credit rules rather than deducted in full by individual landlords.

Abodient works this out for you as the year goes: every rent payment and expense you record lands in its HMRC box, and the Tax estimate card shows what you owe so far, what you are on course to owe by 5 April and how much to set aside each month, with the Section 24 mortgage-interest credit already applied, so the bill builds up in front of you instead of arriving in January.

Do you pay 40% tax on all your rental income?

You do not pay 40% tax on all rental income unless all your taxable rental profit falls inside the higher-rate band; rental profit is added on top of your other income, and only the slice above the higher-rate threshold is taxed at 40% in 2026/27.

Finance Act 2026 expresses the same stacking principle for the new property-income rules by saying: “If a person has property income but no dividend income or savings income, the property income is treated as the highest part of the person’s total income.” For England, Wales and Northern Ireland, the practical 2026/27 threshold is that income above £50,270 falls into higher rate for a person with the standard personal allowance.

So a landlord with £30,000 salary and £10,000 rental profit does not pay 40% on that rental profit; it remains within the basic-rate band. A landlord with £48,000 salary and £10,000 rental profit has only the slice above £50,270 taxed at 40%, not the whole £10,000.

Do landlords in Scotland pay the same tax on rental income?

Landlords who are Scottish taxpayers do not pay the same rental-income tax rates as landlords in England, Wales and Northern Ireland: Scottish taxpayers pay Scottish income tax rates on rental profit, and no separate Scottish property-income rate has yet been set.

The statute says: “Income tax is charged at Scottish rates on the non-savings income of a Scottish taxpayer.” Rental profit is non-savings income, so the Scottish-resident landlord’s rates depend on Scottish tax bands rather than the 24/44/49 property rates announced for England, Wales and Northern Ireland. GOV.UK’s Scottish income tax page says: “The table shows the 2026 to 2027 Scottish Income Tax rates you pay in each band if you have a standard Personal Allowance of £12,570.”

The Scottish Government has acknowledged the difference, stating: “The UK Budget increased the rate of Income Tax charged on property income in the rest of the UK by 2p from 2027-28.” Wales should also be watched separately because Budget 2026 says Scotland and Wales have been given power to set property-income rates in line with their devolved income tax powers.

How much tax do you pay on commercial rent?

An individual landlord pays income tax on commercial rent in the same property-income system as other letting income, so in England, Wales and Northern Ireland the current rates are 20%, 40% and 45% for 2026/27 and the announced April 2027 property rates are 24%, 44% and 49%.

The reason commercial rent is included is that the government defines property income broadly: “Property income is any income from letting land and buildings.” The 2027 property-rate rise therefore covers commercial lets as well as residential lets, unless the landlord is a company. The important difference is mortgage interest: HMRC says that where a loan covers both residential and commercial properties, “only the residential properties’ finance costs are restricted,” so interest on a commercial let is not subject to the individual residential finance-cost restriction in the same way.

If the property is let by a company, the company pays Corporation Tax on its profits instead of income tax; GOV.UK says: “If your company made more than £250,000 profit, you’ll pay the main rate of Corporation Tax.”

Last reviewed November 2026.

Sources

• HM Treasury, Budget 2026 document — “From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%.” Source
• HM Treasury, Budget 2026 document — “These rates will apply across England, Wales and Northern Ireland.” Source
• HM Treasury and HMRC, Budget 2026 Annex A rates and allowances — “For tax year 2026 to 2027, property income is charged at the main rates of income tax.” Source
• HM Treasury, Budget 2026 document — “The government is also deferring the roll-out of Making Tax Digital for Income Tax to several taxpayer groups until further notice.” Source
• HM Treasury, Budget 2026 document — “Measures with no net increase to borrowing are not included, these are debt relief for councils in severe financial distress through the Public Works Loan Board and a landlord registration fee for the Private Rented Sector.” Source
• HM Treasury, Budget 2026 document — “The government will remove Stamp Duty Land Tax on rent paid under assured tenancies in England, effective from 1 May 2026, following the introduction of the Renters’ Rights Act 2025.” Source
• Finance Act 2026 section 7 — “For the tax year 2027-28 the property rates of income tax are as follows—” Source
• HM Treasury and HMRC, Changes to tax rates for property, savings and dividend income — “From April 2027, the property basic rate will be 22%, the property higher rate will be 42% and the property additional rate will be 47%.” Source
• HMRC, Income Tax when you rent out a property — “You must pay tax on any profit you make from renting out property.” Source
• GOV.UK, Income Tax rates and Personal Allowances — “The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.” Source
• Finance Act 2026 section 6 — “If a person has property income but no dividend income or savings income, the property income is treated as the highest part of the person’s total income.” Source
• Income Tax Act 2007 section 11A — “Income tax is charged at Scottish rates on the non-savings income of a Scottish taxpayer.” Source
• GOV.UK, Scottish Income Tax — “The table shows the 2026 to 2027 Scottish Income Tax rates you pay in each band if you have a standard Personal Allowance of £12,570.” Source
• Scottish Government, Scottish Budget 2026 to 2027 — “The UK Budget increased the rate of Income Tax charged on property income in the rest of the UK by 2p from 2027-28.” Source
• HM Treasury and HMRC, Changes to tax rates for property, savings and dividend income — “Property income is any income from letting land and buildings.” Source
• HMRC, Income Tax when you rent out a property — “If you take a loan for both residential and commercial properties, you’ll need to use a reasonable apportionment of the interest to work out your finance costs for the residential properties, as only the residential properties’ finance costs are restricted.” Source
• GOV.UK, Corporation Tax rates and reliefs — “If your company made more than £250,000 profit, you’ll pay the main rate of Corporation Tax.” Source