Budget 2026 for landlords: higher property tax rates and more

Landlords are one of the groups most affected by Budget 2026. Tax on rental profits rises again from April 2027, Making Tax Digital reaches landlords with income over £30,000 at the same time, and owners of the most valuable homes in England face a new annual surcharge from April 2028. This post pulls together every measure that affects unincorporated landlords and the practices that act for them.

Higher tax on rental profits

Budget 2025 created separate property income tax rates of 22%, 42% and 47% from 6 April 2027. Budget 2026 adds two more points from the same date:

These rates apply in England, Wales and Northern Ireland. The Treasury says the Scottish and Welsh governments can set property income rates in line with their existing income tax powers. The bands are unchanged, with the personal allowance frozen at £12,570.

The Treasury’s policy costings say finance cost relief will continue to be aligned to the property basic rate. That means the tax reduction for mortgage interest on residential lets is given at 24% from 2027-28.

Worked example

A higher rate landlord whose rental profit falls entirely in the higher rate band has rental profit of £25,000 before finance costs and £10,000 of mortgage interest.

The increase is £600 a year. The landlord still pays tax at their marginal property rate on profit that is spent on mortgage interest, less a 24% credit.

The Budget document says 84% of income tax payers are unaffected by the savings and property changes, and the costings expect the further rise on property income to raise £575 million in 2028-29. See savings and property income tax rates for the detail.

Making Tax Digital from April 2027

Landlords and sole traders with qualifying income over £30,000 in 2025-26 must use MTD for Income Tax from 6 April 2027. Qualifying income is gross rental and self-employment income, and joint owners count their own share. Budget 2026 means this group will get no penalty points for late quarterly updates in 2027-28, but quarterly updates must still be sent before the return can be filed. The threshold falls to £20,000 from April 2028. See MTD for Income Tax after Budget 2026 and our guide to MTD for landlords.

High value council tax surcharge

From 1 April 2028 owners of residential property in England worth £2 million or more will pay an annual surcharge on top of council tax, collected by councils. Owners, not occupiers, are liable.

The Valuation Office will band properties using April 2026 values, with draft bands visible in autumn 2027 and first bills in March 2028. A deferral scheme will be available to owners with household income of £35,000 or less, capital savings of £16,000 or less, or a household member meeting disability criteria. A 100% premium applies to properties left substantially unfurnished and unoccupied for 12 months or more. The government expects it to affect about 150,000 individuals and 15,000 businesses and other organisations.

More data for HMRC

HMRC is consulting until 20 January 2027 on improving the rental income data it receives from letting agents and the data from tenancy deposit protection schemes, including from agents that do not report to HMRC now. The UK will also join an international agreement to exchange information on real estate automatically from 2029-30. Landlords should assume HMRC will increasingly see their rental income from third parties.

Capital gains and stamp duty

• 60-day returns. Disposals of UK residential property with a gain must be reported, and the tax paid, within 60 days. From 28 October 2026, if a landlord misses the 60-day return but reports the disposal on their Self Assessment return, late filing penalties on the property return stop accruing from then. The 60-day requirement itself remains.
• Assured tenancies. Stamp duty land tax on the rent element of assured tenancies has been removed with effect from 1 May 2026, along with the need to file a return just because rent is payable under one.
• Rates unchanged. Stamp duty land tax rates, including the additional dwellings surcharge, are not changed by the Budget.

What it means for accountants and their landlord clients

Warn clients about 2027-28 bills now. Because payments on account are based on the previous year, most of the increase will appear in the balancing payment due on 31 January 2029. From April 2029 payments on account become regular in-year payments.

Revisit incorporation carefully. The gap between personal property rates and corporation tax widens, but the Treasury expects only a limited move to companies, and incorporation can trigger capital gains tax and stamp duty land tax. See should landlords incorporate.

Get MTD-ready landlords onto software. Landlords with 2025-26 income over £30,000 must be signed up and keeping digital records from 6 April 2027.

Identify £2 million homes. Clients owning high value residential property in England, including in companies, should expect a draft band in autumn 2027 and should check whether deferral, discounts or exemptions apply.

Our guides to tax on rental income, section 24 and CGT for landlords, and the rental income tax calculator, cover the current rules.

Frequently asked questions

What will the tax rate on rental income be from April 2027?

24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers, in England, Wales and Northern Ireland, from 6 April 2027.

Will mortgage interest relief change?

The relief stays as a tax reduction, but it follows the property basic rate, so it is given at 24% from 2027-28 rather than 20%.

When do landlords have to use Making Tax Digital?

From 6 April 2027 if qualifying income from property and self-employment was over £30,000 in 2025-26, and from 6 April 2028 if it was over £20,000 in 2026-27. Those already over £50,000 started in April 2026.

What is the high value council tax surcharge?

An annual charge from April 2028 on owners of homes in England worth £2 million or more, of £2,500 to £7,500 depending on value, collected alongside council tax.