UK Property Income 2027 Reform Calculator: New 22/42/47% Rates
Landlord tax before and after the April 2027 property income rates (22%, 42%, 47%) under Finance Act 2026, with finance cost relief and worked examples.
From 6 April 2027 property income is taxed at its own rates: 22% basic, 42% higher and 47% additional (Finance Act 2026 ss.6-7). Relief for residential mortgage interest moves up with the basic rate, to 22%. The examples below compare the same landlord under 2026/27 rules and under the 2027/28 rules.
Rates before and after
| Band | 2026/27 | From 6 April 2027 |
|---|---|---|
| Basic rate (property income) | 20% | 22% |
| Higher rate (property income) | 40% | 42% |
| Additional rate (property income) | 45% | 47% |
| Finance cost relief (residential) | 20% | 22% |
Worked examples: 2026/27 rules against 2027/28 rules
England, Wales or Northern Ireland taxpayer (for Wales the 2027/28 column assumes the Senedd sets a 10% Welsh rate, which it had not done as at 15 October 2026), no savings or dividend income, no pension contributions. Rental profit is before mortgage interest, which is relieved as a tax reduction. Both columns use the frozen £12,570 Personal Allowance, tapered above £100,000, and the frozen bands. Income Tax only; landlords pay no National Insurance on rent. The relief is limited to income above the Personal Allowance, which is why the first landlord pays nothing in either year.
| Scenario | Salary | Rental profit | Mortgage interest | Tax, 2026/27 rules | Tax, 2027/28 rules | Change |
|---|---|---|---|---|---|---|
| Landlord with no other income | £0 | £18,000 | £8,000 | £0 | £0 | £0 |
| Basic-rate employee with one let | £35,000 | £12,000 | £5,000 | £5,886 | £6,026 | £140 |
| Higher-rate employee, modest portfolio | £60,000 | £20,000 | £8,000 | £17,832 | £18,072 | £240 |
| Higher-rate employee, larger portfolio | £70,000 | £35,000 | £18,000 | £26,832 | £27,172 | £340 |
| Additional-rate employee, heavy borrowing | £200,000 | £45,000 | £22,000 | £92,053 | £92,513 | £460 |
| Full-time landlord, £50k profit, £30k interest | £0 | £50,000 | £30,000 | £1,486 | £1,635 | £149 |
Breakdown: higher-rate employee, larger portfolio
Salary £70,000, rental profit £35,000, mortgage interest £18,000. Total income of £105,000 cuts the Personal Allowance to £10,070.
| Component | 2026/27 rules | 2027/28 rules |
|---|---|---|
| Tax on salary | £16,432 | £16,432 |
| Tax on rental profit | £14,000 | £14,700 |
| Finance cost relief (20% then 22% of interest) | -£3,600 | -£3,960 |
| Total Income Tax | £26,832 | £27,172 |
Cost of each £1 of mortgage interest
Interest is not deducted from profit; it earns a tax reduction at the (property) basic rate. The shortfall against your marginal rate is the same before and after the reform, because both move by 2 points.
| Band | 2026/27: rate less relief | 2027/28: rate less relief |
|---|---|---|
| Basic rate | 20% - 20% = 0p | 22% - 22% = 0p |
| Higher rate | 40% - 20% = 20p | 42% - 22% = 20p |
| Additional rate | 45% - 20% = 25p | 47% - 22% = 25p |
Scope by nation
| Nation | Property rates from 2027/28 |
|---|---|
| England | 22% / 42% / 47% |
| Wales | Welsh property rates: each UK property rate less 10 points, plus a Welsh rate set by the Senedd (FA 2026 Sch 1 para 3), which from 2027/28 can be set separately for property income (FA 2026 Sch 2 para 4). With a Welsh rate of 10% this gives the same 22% / 42% / 47%. The Senedd had not set its 2027/28 rate as at 15 October 2026; the Welsh Government plans to publish its draft 2027-28 Budget on 17 November 2026. |
| Northern Ireland | 22% / 42% / 47% |
| Scotland | Rates for a Scottish taxpayer's property income are set by the Scottish Parliament, which can now set them separately from other income (FA 2026 Sch 2 para 1). Not yet set as at 15 October 2026; the draft Scottish Budget 2027-28 is due on 3 December 2026. |
Related
Frequently asked questions
When do the new property income rates take effect?
From 6 April 2027 (the 2027/28 tax year). They were announced at Budget 2025 and enacted by Finance Act 2026, which received Royal Assent on 18 March 2026. These rates apply in England and Northern Ireland. Welsh taxpayers pay Welsh property rates and Scottish taxpayers the rates the Scottish Parliament sets for property income (Finance Act 2026 s.8 and Schedule 2, in force from 16 September 2026 for 2027/28 by SI 2026/1023). Neither had set them as at 15 October 2026: the Welsh Government plans to publish its draft 2027-28 Budget on 17 November 2026 and the Scottish Government its draft 2027-28 Budget on 3 December 2026.
What are the new rates?
Property basic rate 22%, property higher rate 42% and property additional rate 47% - 2 percentage points above the main rates. Savings income gets the same 22%, 42% and 47% rates from April 2027, UK-wide. Rates on employment, self-employment and pension income are unchanged.
Does mortgage interest relief change too?
Yes. Relief for residential finance costs is a tax reduction at the basic rate, and Finance Act 2026 Schedule 1 paragraph 40 changes that to the property basic rate. From 2027/28 the reduction is 22% of the relievable interest instead of 20%. The gap between a higher-rate landlord's tax on a pound of rent and the relief on a pound of interest stays at 20p.
How is property income taxed alongside a salary?
From 2027/28 the Personal Allowance and other reliefs are set against employment, trading and pension income first (ITA 2007 s.25(3A)). Property income is then treated as the top slice of income, or the slice immediately below savings and dividends if you have them (ITA 2007 s.16A). Each pound of property income is taxed at the property rate for the band it falls into.
Why are property rates going up?
The government says income from property, savings and dividends pays less tax than income from work because it carries no National Insurance, and the higher rates are meant to narrow that gap. It estimates that by 2029/30 about 2.4 million landlords, 6% of taxpayers, will pay more.
Are commercial lettings affected?
Yes. Property income for the new rates is the profit of a UK or overseas property business, plus some related receipts (ITA 2007 s.17A, inserted by Finance Act 2026 s.6). Commercial rents are inside it. The finance cost restriction itself still applies only to residential property.
What about furnished holiday lets?
The furnished holiday lettings regime was abolished from 6 April 2025 for Income Tax and Capital Gains Tax. Holiday lets are now part of an ordinary property business, so the 2027 rates apply to them. Their residential loan interest is now restricted to basic-rate relief, new spending gets replacement of domestic items relief rather than capital allowances, and reliefs for trading business assets, such as Business Asset Disposal Relief, no longer apply.
What can landlords do about it?
There is no rate-free route, and each option has its own cost. A company pays Corporation Tax with finance costs deductible, but transferring let property into one is usually a disposal at market value for Capital Gains Tax and can trigger Stamp Duty Land Tax, and extracting profit is taxed again as dividends. Transfers between spouses are no gain, no loss for CGT (TCGA 1992 s.58). Jointly held income is split equally unless you make a declaration of unequal beneficial interests (ITA 2007 ss.836-837). Take advice before restructuring.
Does this apply to Scottish landlords?
Not at these rates. From 2027/28 the Scottish Parliament sets the rates for a Scottish taxpayer's property income in its Scottish rate resolution, and can set them differently from the rates on other income, with the same band limits (Scotland Act 1998 s.80C as amended by Finance Act 2026 Schedule 2 para 1, in force from 16 September 2026 by SI 2026/1023). The Scottish property rates for 2027/28 had not been set as at 15 October 2026; the Scottish Government plans to present its draft 2027-28 Budget on 3 December 2026. The change in how allowances are used applies UK-wide.
What other changes affect landlords?
Making Tax Digital for Income Tax applies from 6 April 2026 if your qualifying self-employment and property income was over £50,000 in 2024/25, from April 2027 over £30,000 (2025/26) and from April 2028 over £20,000 (2026/27). Business Asset Disposal Relief rose to 18% from 6 April 2026. From April 2027 most unused pension funds count towards the estate for Inheritance Tax.