What is the tax rate on rental income from April 2027?

From 6 April 2027 rental profit is taxed at its own property rates of 22%, 42% and 47% in England and Northern Ireland, two points above 2026-27's 20%, 40% and 45%. Mortgage interest relief rises to 22%.

The rates are law: section 7 of the Finance Act 2026 sets them for the 2027-28 tax year, and section 6 creates the separate property rates. The bands do not move. The rules below come from legislation.gov.uk and GOV.UK, checked on 16 October 2026.

The rates side by side

The Personal Allowance of £12,570 and the basic rate limit of £37,700 are fixed in law up to 2030-31, and HMRC's technical note says the allowance and bands are unchanged by the new rates. Property income here means the profits of a UK or overseas property business, plus a few related items listed in the Act.

What else changes

The order of your income. From 2027-28 rental profit is taxed after wages, self-employed profit and pensions, but before savings and dividends. Your Personal Allowance is used against that other income first. If your other income is below £12,570, the unused part still covers rental profit.

Mortgage interest. Individual landlords still cannot deduct residential finance costs as an expense. The tax reduction continues, but the law now gives it at the property basic rate, 22%.

Wales and Scotland. HMRC's technical note of November 2025 said the property rates would apply in England, Wales and Northern Ireland. Since then, Finance Act 2026 Schedule 2 has come into force, from 16 September 2026, for 2027-28 onwards. For Welsh taxpayers, each property rate is the UK rate less 10 points plus a Welsh rate the Senedd sets for the year, so Welsh rates match England's only if the Senedd sets 10%. The Scottish Parliament can set separate property rates for Scottish taxpayers. Until it does, their rental profit is taxed at the Scottish income tax rates.

What stays the same. The £1,000 property allowance, the Rent a Room scheme and the treatment of carried-forward property losses are unchanged. So is Making Tax Digital.

Worked comparison: 2026-27 against 2027-28

Three landlords in England, each with the same income in both years and unchanged bands.

Ann's salary uses £22,430 of her £37,700 basic rate band, so all £12,000 of rent stays in the basic band at 22%. Ben is already a higher-rate taxpayer, so his rent is taxed at 42%. Carol's £9,000 pension is covered by her Personal Allowance, and the remaining £3,570 of allowance covers part of her rent. That leaves £12,430 taxed at 22%, compared with 20% in 2026-27.

The rule of thumb: the rise is 2% of the rental profit that is actually taxed, less 2% of your mortgage interest.

What this means for you

The 2027-28 tax year runs from 6 April 2027 to 5 April 2028, and its balancing payment is due by 31 January 2029. If you make payments on account, each is half of the previous year's bill, so the 31 January and 31 July 2028 payments will be based on 2026-27. Most of the increase will show up in the balancing payment on 31 January 2029.

If your rent is close to the higher-rate threshold, the new ordering matters: rental profit now sits on top of your wages, so it is the rent that crosses into 42%.

Steps to prepare for 2027-28

1. Estimate your 2027-28 rental profit, rent less allowable expenses, leaving out mortgage interest.
2. Add your other income to see which band the rent falls into, remembering it is taxed last, before savings and dividends.
3. Apply 22%, 42% or 47% to the rent in each band.
4. Take off 22% of your mortgage interest, within the usual limits.
5. Set aside the difference from your 2026-27 bill for the balancing payment on 31 January 2029.
6. If you live in Wales or Scotland, check the rates set by the Senedd or the Scottish Parliament for 2027-28.

The free MTD check shows whether Making Tax Digital also starts for you in April 2027, and the landlord section has more guides on how rental income is taxed.