Landlords’ tax in 2026/27: what changed and what did not

Written for the 2026/27 tax year. Checked against GOV.UK on 6 October 2026.

Landlords do not generally pay National Insurance on rental income in 2026/27. At Budget 2025 the government announced a set of separate Income Tax rates for property income, which GOV.UK says start on 6 April 2027. This guide updates our earlier article, written for 2025/26. It comes from Wainwrights Accountants in Bromborough, Wirral. We work with landlords across the UK.

Key figures for landlords in 2026/27

Do landlords pay National Insurance on rental income?

Generally, no. GOV.UK’s guide for landlords describes National Insurance as voluntary: you can choose to pay contributions to qualify for the State Pension or certain benefits. HMRC’s manual says letting is not a trade. Class 4 National Insurance is charged on the profits of a trade, such as running a guest house.

GOV.UK’s technical note on the Budget 2025 changes says the treatment of property income for National Insurance “will not change as a result of this policy”.

HMRC’s National Insurance Manual says most landlords are not liable to pay Class 2 and are not entitled to pay it voluntarily, but may be able to pay Class 3. It gives a bed and breakfast and a hotel as examples of a trade. Those owners pay Class 4 if their profits go over the thresholds. For 2026/27 Class 4 is 6% on profits over £12,570 up to £50,270, and 2% above that.

GOV.UK says a landlord may be eligible to pay voluntary Class 2 if they count as “gainfully employed” for National Insurance purposes. Its examples are that being a landlord is their main job, they rent out more than one property, or they are buying new properties to rent out. The voluntary rates for 2026/27 are £3.65 a week for Class 2 and £18.40 a week for Class 3.

What did the government announce for landlords?

At Budget 2025 the government announced separate Income Tax rates for property income. GOV.UK says the rates for the 2027/28 tax year will be 22% (property basic rate), 42% (property higher rate) and 47% (property additional rate), and that the legislation takes effect from 6 April 2027. Rates in Scotland and Wales may be different.

The GOV.UK policy paper was published on 27 November 2025. It says people with property income pay less tax than people who work, “as they do not pay National Insurance”, and that the higher rates are meant to narrow that gap.

The paper says the property rates will apply to England, Wales and Northern Ireland. It says the Scottish Parliament and the Senedd will be given the ability to set their own property rates. Rates in Scotland and Wales may therefore be different.

GOV.UK’s technical note lists what changes from April 2027 and what does not:

• Changes. Property income gets its own rates. Relief for residential finance costs is calculated at the property basic rate. The Personal Allowance and other reliefs are set against other income first, before property, savings or dividend income.
• Stays the same. National Insurance treatment. The property allowance. The Rent a Room Scheme. Carried forward property losses must still be set against property income.

What tax rates apply to rental profit in 2026/27?

In 2026/27 rental profit is taxed with income such as wages, pensions and trading profit, at the normal Income Tax rates. In England, Wales and Northern Ireland these are 20%, 40% and 45% above the £12,570 Personal Allowance. GOV.UK says the separate property rates take effect from 6 April 2027. Income Tax bands are different if you live in Scotland.

GOV.UK says the rate you pay depends on your total income for the year, from employment, self-employment or pensions, and any allowances you can claim. Your profit is your rental income less the expenses or allowances you can claim.

Illustration only. On £10,000 of rental profit that all falls in the basic rate band for England, Wales and Northern Ireland, tax at 20% is £2,000. At the 22% property basic rate GOV.UK gives for 2027/28, it would be £2,200. Rates in Scotland and Wales may be different. A real bill depends on the whole picture.

We prepare rental accounts and tax returns. See our landlord accounts service and Self Assessment help.

Is mortgage interest relief changing?

Not in 2026/27. An individual landlord cannot deduct residential mortgage interest from rental income. Relief is given as a tax reduction at the basic rate of Income Tax, which is 20%. GOV.UK’s technical note says that from 2027/28 the relief will be calculated at the property basic rate of 22%.

GOV.UK says the restricted finance costs include interest on mortgages, loans and overdrafts, and the fees for getting or repaying them. The reduction is worked out on the lowest of three figures: your finance costs, your property profits, and your adjusted total income above the Personal Allowance. It cannot create a tax refund. Finance costs that are not used are carried forward.

Companies are not affected by the restriction. GOV.UK says a company paying Corporation Tax can claim interest on property loans as an allowable expense.

Does the £1,000 property allowance still apply?

Yes. The property allowance is a tax exemption of up to £1,000 a year for individuals with income from land or property. GOV.UK’s technical note on the 2027 changes says the property allowance and the Rent a Room Scheme are unchanged. Joint owners each get the allowance against their own share of the rent.

If you claim the property allowance, you cannot also deduct your expenses. GOV.UK says you cannot use it if, for example, you claim the tax reduction for finance costs, or on income from letting a room in your own home under the Rent a Room Scheme.

GOV.UK says rental income must go on a Self Assessment tax return if it is more than £2,500 after allowable expenses, or £10,000 before them.

Does Making Tax Digital apply to landlords?

Yes, unless they are exempt, for landlords whose qualifying income was over £50,000 in the 2024/25 tax year. GOV.UK says they should have started on 6 April 2026. The threshold is £30,000 of 2025/26 income from 6 April 2027, and £20,000 of 2026/27 income from 6 April 2028. Qualifying income comes from self-employment or property, or both.

Landlords who are in keep digital records and send HMRC a quarterly update through software. HMRC will not apply penalty points for late quarterly updates during 2026/27. We explain the deadlines in our guide to the 2026/27 tax year. Making Tax Digital support is an add-on to our landlord accounts service.

How is Capital Gains Tax charged when a landlord sells?

Capital Gains Tax is charged on gains above the £3,000 tax-free allowance. On gains from 6 April 2026, a higher or additional rate taxpayer pays 24%. A basic rate taxpayer pays 18% or 24%, depending on the size of the gain and their taxable income. Tax due on UK residential property is reported and paid within 60 days.

The 60 days run from completing the sale. GOV.UK says you may have to pay interest and a penalty if you do not report and pay on time. If the property was jointly owned, each owner reports their own gain or loss.

The costs of buying, selling or improving the property can be deducted from the gain. Normal maintenance, such as decorating, does not count.

We prepare and file 60-day Capital Gains Tax returns for landlords. It is a service we quote for.

What do our landlord packages cost?

Our landlord package is from £20 a month + VAT (£24 including VAT) for a single owner with one property. Joint owners with one property pay £25 a month + VAT (£30 including VAT). Each property after the first adds £5 a month + VAT (£6 including VAT). Prices are indicative.

The price includes a UK property tax return, one Self Assessment tax return (two for joint owners) and tax efficiency planning. Making Tax Digital compliance support is an add-on at £35 a month + VAT (£42 including VAT).

Our team confirms the scope and final price with you. Prices are subject to turnover not exceeding £150,000. Above that, our team will give you a custom quote. See our pricing.

What do landlords ask us about tax in 2026/27?

Do landlords pay National Insurance on rental income?

Generally, no. GOV.UK describes National Insurance for landlords as voluntary. Class 4 National Insurance is charged on the profits of a trade, and HMRC’s manual says letting is not a trade.

When do the 22%, 42% and 47% property rates start?

GOV.UK says the legislation takes effect from 6 April 2027, for the 2027/28 tax year. It says Scotland and Wales will be able to set their own property rates. In 2026/27 rental profit is taxed at the normal Income Tax rates.

Will the property rates be the same in Scotland and Wales?

Not necessarily. GOV.UK says the rates will apply to England, Wales and Northern Ireland, and that the Scottish Parliament and the Senedd will be given the ability to set their own property rates.

Can I still get relief for mortgage interest?

Yes, for residential property, as a tax reduction and not as an expense. For an individual landlord it is worked out at the basic rate of Income Tax, 20% in 2026/27. GOV.UK says it will be calculated at the property basic rate, 22%, from 2027/28.

How long do I have to report the sale of a UK residential rental property?

60 days from completing the sale. GOV.UK says you must report and pay any Capital Gains Tax due on UK residential property in that time.

Do the new property rates apply to a limited company?

The GOV.UK policy paper says the measure affects individuals who receive income from letting property. GOV.UK says a company counts rental income the same way as any other business income. Whether a company suits you depends on your own figures. See our limited company accountants service.

Can Wainwrights work out what these changes mean for me?

Yes. An article can only explain the general rules. Book a free call and an accountant will go through your own figures with you.

Rules and rates change from one tax year to the next, and how they apply depends on your own figures. To talk yours through with an accountant in Bromborough, get a quote or book a free call.