by Louise Wickens
Private Client Services Director
27 October 2026
Articleby Louise Wickens
Private Client Services Director
From 6 April 2027, the way property income is taxed will change, with new separate rates of Income Tax applying to property income in England, Wales and Northern Ireland.
The scale of the potential impact is significant. According to the latest HMRC Property Rental Income Statistics, 2.88 million unincorporated landlords declared income from renting property in 2024/25, with total property income of £58.99 billion.
What is changing from April 2027?
The Government is introducing separate Income Tax rates specifically for property income. From the 2027/28 tax year, these will be:
This represents a two percentage point increase compared with the current main Income Tax rates of 20%, 40% and 45%.
Importantly, property income will also have its own place within the Income Tax calculation. It will generally be taxed after employment, trading and other income, but before savings and dividend income.
For landlords, the result could be a higher overall Income Tax liability and less rental income retained after tax.
The £1,000 property allowance is not changing
The £1,000 property allowance will remain unchanged, as will the Rent a Room Scheme.
Property owners will therefore still need to consider whether claiming the property allowance, where eligible, or deducting their actual allowable expenses provides the more appropriate treatment for their circumstances.
Who could be affected?
The new rules could affect a wide range of people receiving property income, including:
The changes can also apply more widely to other forms of property income. The Government's technical note confirms that the definition of property income remains unchanged and includes income from property letting and property income distributions from investment funds.
Making Tax Digital from April 2027
April 2027 will also bring another significant change for many landlords. The threshold for Making Tax Digital (MTD) for Income Tax will reduce to £30,000, bringing more individuals with property and/or self-employment income within the regime. Those affected will need to keep digital records using compatible software and provide quarterly updates to HMRC.
With the property Income Tax changes and the wider roll-out of MTD taking effect at the same time, landlords should consider both their tax position and their record-keeping arrangements well in advance of April 2027.
What should property owners do now?
Although the changes do not take effect until 6 April 2027, now is a sensible time to understand what they could mean for your position.
Property owners should consider:
Landlords with residential borrowing should note that, from April 2027, tax relief for residential finance costs will be calculated at the new property basic rate of 22%, rather than 20%.
The effect will depend on your property income alongside your other sources of income, so understanding your likely position ahead of April 2027 can help avoid surprises.
Landlords with residential borrowing should consider how the change to the rate of finance cost relief interacts with their wider tax position.
Property ownership decisions should rarely be driven by tax alone, but understanding the forthcoming rules gives landlords time to consider their longer-term plans before they take effect.
How James Cowper Kreston can help
The introduction of separate property Income Tax rates adds another consideration for landlords and property owners when planning ahead.
Reviewing your position before April 2027 can help you understand the likely impact, model your future tax liabilities and identify whether there are planning opportunities appropriate to your circumstances.
If you receive income from property and would like to understand what the changes could mean for you, please contact a member of our Private Client Services team.