Four percentage points. That is the combined size of the tax rise now facing private landlords on their rental profits, confirmed across two Budgets, and it lands in full from 6 April 2027 with no phasing in. There is no gentle transition and no cushion for smaller landlords with one or two properties.
The Autumn Budget on 28 October 2026 confirmed the second half of that rise. Chancellor John Healey added a further two percentage points to income tax on property income, stacking on top of the two points Rachel Reeves announced in 2025. Both sets of changes take effect on the same date, 6 April 2027. The result: basic-rate landlords will pay 24% on rental profits, higher-rate landlords 44%, and additional-rate landlords 49%. This article sets out what changed, what the Office for Budget Responsibility (OBR) said about the effect on rents, and what landlords should be checking before the new rates take effect.
Key Takeaways
- From 6 April 2027, income tax on rental profits rises to 24% (basic rate), 44% (higher rate) and 49% (additional rate), a four-point rise combining the 2025 and 2026 Budget changes, applied in a single step.
- The OBR warns the changes are "a material reduction in returns to private landlords" and could cause "a steady rise in rents" if landlord supply falls.
- Stamp duty and the 5% additional-dwelling surcharge were left unchanged, and the Local Housing Allowance freeze was not reversed.
- Landlords with mid-size portfolios face thousands of pounds in extra annual tax, this article shows the arithmetic on £12,000 and £30,000 of profit.
- Decisions on selling, refinancing or incorporating should start with a RICS valuation and professional tax advice, not guesswork.
What Actually Changed in the Budget
Before this Budget, rental income was taxed at the normal income tax bands: 20%, 40% and 45%. The 2025 Budget set out two further points, and the October 2026 Budget added a second two points on top, with both increases confirmed to take effect together, under the Finance Bill 2026-27, on 6 April 2027. There is no intermediate step and no phase-in. Landlords move straight from the current rates to the new rates below:
| Income tax band | Current rate (to 5 April 2027) | Rate from April 2027 |
|---|---|---|
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
These rates apply in England, Wales and Northern Ireland. Savings income faces the identical four-point increase, with the Personal Savings Allowance staying at £1,000 for basic-rate taxpayers, £500 for higher-rate, and nil for additional-rate.
The Landlord Tax Rise April 2027: Worked Examples
Numbers make this land. Below are two simplified examples, using rental profit after allowable expenses but before this specific tax is applied. These are illustrative only, your actual liability depends on your full tax position, and a qualified accountant should confirm the figures that apply to you.
Example 1: £12,000 rental profit, basic-rate taxpayer
- At the current 20% rate: £2,400 tax
- At the new 24% rate: £2,880 tax
- Extra tax from this landlord tax rise April 2027 measure: £480 a year
Example 2: £30,000 rental profit, higher-rate taxpayer
- At the current 40% rate: £12,000 tax
- At the new 44% rate: £13,200 tax
- Extra tax: £1,200 a year
For landlords running several properties, these amounts multiply quickly. A portfolio generating £60,000 of taxable profit for a higher-rate taxpayer would see roughly £2,400 of extra annual tax compared with current rules. For a landlord with multiple properties already managing mortgage interest restrictions, this additional liability can materially change whether a portfolio remains cash-flow positive.
What the OBR Said About Rents and Supply
The OBR's assessment is the part of this story that affects tenants as much as landlords. Its analysis describes the combined rise as a "material reduction in returns to private landlords." It goes further, flagging a risk of "a steady rise in rents" as a consequence.
The mechanism the OBR describes works in two stages. First, lower after-tax returns discourage new landlords from entering the market and push some existing landlords to sell up, shrinking the stock of private rental homes. Second, if tenant demand continues to outstrip that shrinking supply, which the OBR judges "more likely than not", remaining landlords are in a stronger position to pass higher costs on to tenants through rent increases.
"A material reduction in returns to private landlords", OBR, on the combined effect of the 2025 and 2026 property-income tax rises.
Industry voices echoed the warning. Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said the Chancellor had "made life harder for renters right across the country." Heather Powell of Blick Rothenberg called the measure "the final nail in the coffin" for many private investors, predicting a wave of landlord sales that pushes tenants toward corporate build-to-rent operators instead. Olivia McSweeney of UK Sotheby's International Realty suggested this could be "the final straw" for smaller, less-leveraged landlords already squeezed by other costs.
Those other costs matter too. Paul Shamplina of Landlord Action and Dominic Agace of Winkworth both pointed to Renters' Rights Act compliance costs landing on landlords at the same time as the tax rise, compounding pressure on margins.
Notably, the Chancellor left two other levers untouched. Stamp duty, including the 5% additional-dwelling surcharge on second homes and buy-to-let purchases, was not changed. The Local Housing Allowance freeze, which the NRLA had lobbied to reverse, also stayed in place, meaning housing benefit support for tenants is not rising to match any rent increases that follow.
Market Backdrop: What Zoopla's October Data Shows
Zoopla's October 2026 House Price Index gives some context for how the sales market looked as this landlord tax rise April 2027 was announced. UK house prices were up 0.8% year on year, though London prices were down 1%. Supply of homes for sale was up 7% on the previous year, while completed sales were down 7%. That combination, more stock, fewer sales, suggests a market where sellers, including landlords considering an exit, may need to be realistic on asking price and timescale.
For landlords weighing a sale against holding through the tax change, this backdrop matters: rising stock levels mean buyers have more choice, so pricing decisions need to reflect current demand rather than last year's conditions.
What to Do Now: A Practical Checklist
With roughly six months between the Budget and the April 2027 start date, there is time to plan rather than react. Consider these steps.
- Get a professional tax projection. Ask your accountant to model your rental profit at the new 24%/44%/49% rates against your current structure, including whether mortgage interest relief restrictions already in place compound the effect.
- Review whether incorporation suits your situation. Holding property through a limited company taxes profits under corporation tax rules rather than these income tax rates, but incorporation carries stamp duty, capital gains and refinancing costs of its own. This needs individually tailored advice, it is not a universal answer.
- Commission a RICS valuation before selling or refinancing. If the tax change tips you toward selling, an independent RICS valuation gives a defensible, evidence-based figure for pricing discussions with agents or buyers, and supports lender conversations if you are refinancing instead.
- Check EPC compliance now. Energy efficiency rules affecting rental properties remain a live cost. A property that needs EPC improvement work is harder to sell at full value and harder to let compliantly, address this before it becomes a forced, rushed cost.
- Review tenancy terms against the Renters' Rights Act. Compliance costs here sit alongside the tax change, not instead of it. Landlords should check notice periods, deposit handling and tenancy structures are current.
- Model the rent position carefully, not automatically. The OBR's warning about rent rises is about market-wide pressure, not a guaranteed pass-through for any single tenancy. Local demand, tenant affordability and the Local Housing Allowance freeze all shape what is realistic.
FAQ
When does the landlord tax rise April 2027 take effect?
From 6 April 2027, under the Finance Bill 2026-27. There is no phasing, the full four-point increase (combining 2025 and 2026 Budget measures) applies from that date in a single step.
Does this apply to Scotland?
No. The changes apply in England, Wales and Northern Ireland. Scotland sets its own income tax rates separately.
Did stamp duty change for landlords in this Budget?
No. Stamp duty, including the 5% surcharge on additional dwellings, was left unchanged.
Should I incorporate my rental properties to avoid the higher rates?
Possibly, but it depends on your individual circumstances, including existing mortgage terms, capital gains exposure and the costs of transferring ownership. Speak to a qualified accountant before making this decision.
Will rents definitely rise because of this change?
The OBR considers a rent rise "more likely than not" if demand continues to outstrip a shrinking supply of rental homes, but this is a market-wide risk assessment, not a certainty for every landlord or tenancy.
Do I need a RICS valuation if I'm not selling yet?
A current valuation is useful even if you are only weighing up options, since it gives you an evidence-based starting point for decisions on refinancing, incorporation costs, or future sale timing.
Conclusion
The landlord tax rise April 2027 is now confirmed law in the making, not speculation. Basic, higher and additional-rate landlords face 24%, 44% and 49% tax on rental profits from 6 April 2027, a four-point increase applied in one step with real pounds-and-pence consequences shown in the worked examples above. The OBR has been explicit that this risks reduced landlord returns and upward pressure on rents, while stamp duty and the Local Housing Allowance freeze remain unchanged.
The right next step is not a hasty decision. Get a tax projection from a qualified accountant, obtain an independent RICS valuation if selling or refinancing is on the table, and check EPC and Renters' Rights Act compliance well before next April. Six months is enough time to plan properly, it is not enough time to leave this until March 2027.