Landlords From April 2027: 24% Property Income Tax and the MTD Penalty Easement

The 2026 Budget doubled the planned rise in tax on rental income. From 6 April 2027, property income will be taxed at 24%, 44% and 49% - not the 22%, 42% and 47% we described in our buy-to-let article. The Budget also eased the start of Making Tax Digital for landlords joining in April 2027, which changes what our Making Tax Digital article said about that group. Here’s what’s new.

The new property income rates

The 2025 Budget had already announced a 2 percentage point rise in tax on property income from April 2027. The 2026 Budget adds another 2 points on top, from the same date. From 6 April 2027, property income will be taxed at:

• 24% at the basic rate (20% today)
• 44% at the higher rate (40% today)
• 49% at the additional rate (45% today)

These rates apply in England, Wales and Northern Ireland. Scotland sets its own income tax rates.

The government says 84% of income taxpayers won’t be affected by the increases to property and savings tax, and around half of the money raised is expected to come from the top 10% of households.

What it costs in practice

As a rough guide, the extra tax is 4p for every £1 of taxable rental profit compared with today, and 2p more than under the previous plan. Using the landlord from our earlier article, with £18,000 of rental income taxed under Section 24, that’s around £720 a year more than today’s rates, or £360 more than the 22/42/47 rates we described. The exact figure depends on how your rental income falls across the tax bands.

Section 24 still applies. Mortgage interest still can’t be deducted before tax, and is given as a tax credit instead. The Budget document doesn’t say whether the rate of that credit changes alongside the new property rates, and we’ll cover it once HMRC publishes the detail. Either way, the gap between what higher-rate landlords pay and what they’d pay with full interest relief gets wider from April 2027.

If you also hold cash savings outside an ISA, note that tax on savings interest is rising to the same 24%, 44% and 49% from April 2027, across the whole UK. See our article on the Cash ISA changes for how this affects your savings.

Making Tax Digital: a soft landing for the April 2027 group

From 6 April 2027, landlords and sole traders with gross qualifying income over £30,000 join Making Tax Digital for Income Tax. Our earlier article said the first-year penalty easement for the April 2026 group wasn’t expected to apply to later groups in the same way.

The Budget changes that. People joining in April 2027 won’t receive penalty points for late submission of their first four quarterly updates in the 2027/28 tax year. As with the first group, this covers quarterly updates, not the Final Declaration, and late payment penalties still apply.

The government is also deferring the roll-out of Making Tax Digital for Income Tax to “several taxpayer groups until further notice”. The Budget document doesn’t list which groups, so if you’re expecting to join from April 2028, wait for HMRC’s guidance before assuming your start date has moved.

Payments on account will change from April 2029

From April 2029, taxpayers who already make payments on account will make smaller, more regular payments through the year instead of two large ones. The aim is to bring payments closer to when the income is earned and avoid big, unexpected bills. Details are still being worked out, but for landlords used to budgeting for 31 January and 31 July, this will mean a different cash flow pattern. If you’ve struggled with those bills before, our article on what to do if you can’t pay your Self Assessment bill covers your options in the meantime.

What to do now

• Re-run your rental figures at 24%, 44% or 49% for 2027/28 rather than the rates in our earlier article.
• If you’re a higher-rate landlord with high borrowing, look again at the options from our buy-to-let article, such as reducing borrowing or sharing ownership with a lower-earning spouse.
• If your gross property and self-employment income is over £30,000, you still need to be ready for Making Tax Digital from April 2027 - the easement removes penalty points for late quarterly updates in the first year, but not the requirement itself.
• Move any spare cash savings into an ISA where you can, since interest outside one will be taxed more heavily from April 2027.

The bottom line

April 2027 will be a significant step up in tax for individual landlords, particularly higher-rate taxpayers with mortgages. The Making Tax Digital easement gives the next group some breathing space in its first year, but doesn’t change what you have to do. For everything else in the Budget, see our Budget 2026 round-up.