New Property Tax: April 2027 Rates

A new property tax system will apply to certain rental income from 6 April 2027. Instead of taxing property income at the ordinary Income Tax rates, separate property basic, higher and additional rates will be introduced. The change principally affects individual landlords and other people receiving taxable property income in England, Wales and Northern Ireland. It does not create a general annual tax on owning a home, and it should not be confused with Council Tax, Stamp Duty Land Tax or Capital Gains Tax.

The new property tax rates will be 22%, 42% and 47%, depending on the taxpayer’s applicable band. This represents a two-percentage-point increase compared with the corresponding main Income Tax rates currently used in England, Wales and Northern Ireland. The change does not begin during the 2026/27 tax year; it takes effect from 6 April 2027. Landlords reviewing their wider position can use the rental income tax calculator to estimate tax on rental profits under the relevant assumptions.

What Is the New Property Tax?

The term “new property tax” does not refer to one tax charged on every property owner. It describes separate Income Tax rates that will apply to taxable property income received by individuals. According to the HMRC policy paper, the property basic, higher and additional rates will apply from the 2027/28 tax year.

The measure was enacted through the Finance Act 2026. It applies to property income rather than the market value of a property. In practical terms, an individual landlord will normally calculate taxable rental profit after the permitted deductions and then apply the relevant tax calculation rules. Property owned through a company remains within the Corporation Tax system rather than the individual property-income rates.

What Changed in the Budget?

Budget 2025 announced that property income would no longer automatically use the ordinary 20%, 40% and 45% rates applicable to non-savings income in England, Wales and Northern Ireland. The government instead established three dedicated property-income rates, each two percentage points higher. The wider Budget also changed the ordering rules for certain allowances and reliefs when a taxpayer has more than one type of income.

These rates apply to England, Wales and Northern Ireland under the enacted provisions. Scottish Income Tax operates under different devolved arrangements, so Scottish taxpayers should check the applicable guidance before the 2027/28 tax year. A summary of this measure alongside other announced reforms is available in the UK tax changes guide.

Who Will Be Affected?

The new rates may affect residential landlords, commercial landlords, partners receiving a share of property-business profits and some non-resident landlords with taxable UK property income. The tax is charged on taxable property profit, not gross rent collected. Allowable revenue expenses and any available property allowance must therefore be considered before the final liability is calculated.

Owner-occupiers who receive no taxable property income will not pay this tax merely because they own their home. Property businesses operated through limited companies are generally charged Corporation Tax on their profits instead. Trusts, estates, jointly owned properties and non-resident arrangements can involve separate rules, so the headline rates should not be applied without checking the taxpayer’s legal and beneficial ownership position.

How Much More Could Landlords Pay?

A two-percentage-point increase equals an additional £20 for every £1,000 of taxable property income to which the higher rate applies. For example, if £10,000 of property profit falls entirely within one affected band, the simple rate difference would be £200. This is an illustration rather than a complete tax calculation because other income, allowances, reliefs, losses and finance costs can change the result.

The final difference may not equal exactly 2% of total rental profit. The allocation of the Personal Allowance and other reliefs across employment, property, savings and dividend income can affect which income reaches each band. Landlords should therefore model their complete income position rather than applying 22%, 42% or 47% to all rent received.

What Counts as Taxable Property Income?

Rental profit is not normally the same as rent received. According to GOV.UK guidance for landlords, eligible day-to-day costs can include letting-agent fees, insurance, repairs, utilities paid by the landlord and certain professional fees. Capital improvements, private expenses and the original cost of purchasing the property are not ordinary revenue deductions.

Individuals with qualifying property income may be able to use the £1,000 property allowance, although it cannot always be combined with separately claimed expenses. Residential mortgage interest is also subject to special rules for individual landlords. It is generally dealt with through a basic-rate tax reduction rather than being deducted fully when calculating rental profit.

What Happens to Mortgage Interest Relief?

The government’s technical note on the new rates states that residential finance-cost relief will continue at the property basic rate. This means the applicable rate is due to become 22% from 6 April 2027. That change may partially offset the higher tax rate for landlords who have eligible restricted finance costs, but it does not restore full deduction of mortgage interest for higher- or additional-rate taxpayers.

The calculation can become more complicated where finance costs are carried forward or property profit is lower than the interest paid. Landlords should retain lender statements and records showing how borrowing relates to the rental business. A cash-flow assessment through the buy-to-let calculator can help illustrate how tax, mortgage costs and operating expenses interact.

Are Stamp Duty Rates Changing Again?

The new property tax measure concerns income from property, not tax paid when purchasing property. Current SDLT rates in England and Northern Ireland have applied since 1 April 2025, while the higher-rate surcharge for additional dwellings has been five percentage points above the standard residential rates since 31 October 2024. According to the current HMRC residential SDLT rates, qualifying first-time buyers can receive relief on purchases costing no more than £500,000, with no SDLT on the first £300,000.

Scotland and Wales use Land and Buildings Transaction Tax and Land Transaction Tax respectively rather than SDLT. Buyers in England or Northern Ireland can estimate the current purchase charge with the Stamp Duty calculator. People buying an additional dwelling can use the dedicated second-home Stamp Duty calculator.

What About Buy-to-Let and Holiday Lets?

Individual buy-to-let landlords receiving taxable property income are among those most likely to be affected. However, the rate change does not alter the fundamental distinction between gross rent and taxable profit. Allowable running costs, property losses, ownership shares and residential finance-cost relief must still be applied under their respective rules.

The separate furnished holiday lettings regime ended from April 2025. HMRC confirms that former furnished holiday letting income is now generally treated under the same property-income framework as other relevant property income, while the previous FHL-specific reliefs no longer apply. This is an earlier reform and should not be presented as a new April 2027 measure.

Does the Change Affect Property Sales?

A gain made when an individual sells a buy-to-let property, second home or other chargeable property is normally considered separately under Capital Gains Tax rules. It is not taxed at the new 22%, 42% or 47% property-income rates merely because the asset is property. The applicable gain can depend on purchase and sale costs, capital improvements, losses, ownership shares and available reliefs.

The Capital Gains Tax calculator can provide an initial estimate, while the guide to reducing Capital Gains Tax on property explains relevant reliefs and deductions. UK residential property gains may also carry a separate reporting and payment deadline, so landlords should not wait for the annual Self Assessment deadline without checking the rules.

How Should Landlords Prepare?

Preparation should begin with accurate records rather than immediate restructuring. Review expected rent, allowable expenditure, carried-forward losses, mortgage interest and other taxable income. This will indicate how much property profit may fall within each tax band and whether the rate change is material.

Landlords should be cautious about transferring an existing property to a company solely to seek a lower headline tax rate. A transfer can potentially involve Capital Gains Tax, SDLT, refinancing costs, legal fees and different rules for taking money from the company. Whether company ownership is suitable depends on the complete commercial and personal position, not only the tax rate on rental profits.

Investment decisions should also consider financing, void periods, maintenance and expected returns. The rental ROI calculator can help compare overall returns without treating tax as the only factor. Complex ownership changes should be reviewed with a qualified tax adviser before any binding transaction takes place.

Common Property Tax Mistakes

Do not apply the headline rates directly to gross rent, confuse the measure with SDLT or use it to calculate Capital Gains Tax on a sale. Another error is stating that the rates begin in April 2026; the operative date is 6 April 2027. Landlords should also avoid assuming that incorporation automatically produces a tax saving.

Other risks include claiming capital improvements as repairs, omitting jointly owned income, using the wrong ownership split and failing to retain supporting invoices. Taxpayers should distinguish between individual, partnership, trust and company ownership before calculating the liability. Accurate bookkeeping and early professional advice can prevent an apparently simple rate change from producing incorrect returns or planning decisions.

This guide provides general information about the new property tax rates announced for April 2027. Tax rules, devolved arrangements and individual circumstances can differ. For personalised advice, consult a qualified tax adviser or contact HMRC directly. Always check GOV.UK for current legislation, rates and guidance.