# UK Property Income Tax Rates: 2026/27 and 2027/28 Guide

Learn about the upcoming UK property tax changes for landlords, including Making Tax Digital in 2026, increased dividend tax rates, and the 2% property income tax surcharge starting in April 2027.

**Published:** 2026-07-13  
**Updated:** 2026-07-13  
**Source:** https://aztajournal.com/gb/uk-property-income-tax-rates-guide

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> UK landlords face significant tax changes across the 2026/27 and 2027/28 tax years. This guide breaks down the introduction of higher dividend taxes, Making Tax Digital rules, and a legislated 2 percentage point income tax surcharge on personal property profits starting in April 2027.

UK property income tax rates will undergo a major restructuring with the introduction of a dedicated 2 percentage point tax surcharge on personal rental profits starting from the 2027/28 tax year. While the 2026/27 tax year maintains standard income tax rates on rental profits, landlords must prepare immediately for increased dividend tax rates, Making Tax Digital compliance, and the upcoming 2027 surcharges.

## Key Takeaways: What Landlords Need to Know

To navigate the transitioning UK property tax landscape, landlords should focus on these essential rate timelines, digital compliance actions, and structural reviews:

- **Static Rental Rates in 2026/27**: Rental profits for individual landlords remain taxed at standard income tax bands ranging from 20% to 45% during the 2026/27 tax year.
- **Dividend Tax Increases**: Individuals holding properties within a limited company face a 2 percentage point increase in both basic and higher-rate dividend tax bands from 6 April 2026.
- **Making Tax Digital (MTD) Implementation**: Landlords with gross property or self-employment income over £50,000 must maintain digital records and submit quarterly HMRC updates starting 6 April 2026.
- **The 2027/28 Property Surcharge**: Section 6D of the Income Tax Act 2007 introduces an additional 2 percentage points to all personal property income tax bands from 6 April 2027.
- **Strategic Restructuring**: Landlords should model the financial impact of transferring properties to a limited company vs keeping them in personal names to manage rising tax liabilities.

## What are the property income tax rates for 2026/27?

For the 2026/27 tax year, landlords do not face any property-specific income tax rates, and rental profits are taxed at standard individual income tax rates. Individual rental profits are stacked on top of other non-dividend income, such as employment salary, and taxed at your marginal rate according to official Deloitte Tax Tables.

| Band | Taxable Income Range | Standard Income Tax Rate |
| --- | --- | --- |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 to £50,270 | 20% |
| Higher Rate | £50,271 to £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |

## How do the 2026/27 dividend tax rate increases affect landlords?

Dividend tax rates increase by 2 percentage points in basic and higher bands from 6 April 2026, raising company distribution costs. As outlined by HMRC guidance, this policy targets corporate owners who withdraw profits as dividends rather than salary or reinvesting.

If you hold your rental property portfolio inside a limited company, your corporation profits are insulated from standard income tax. However, when you pay yourself dividends from those company accounts, these new, higher dividend rates will directly reduce your personal net income.

| Dividend Tax Band | Old Rate (2025/26) | New Rate (2026/27) |
| --- | --- | --- |
| Basic Rate | 8.75% | 10.75% |
| Higher Rate | 33.75% | 35.75% |
| Additional Rate | 39.35% | 39.35% (Unchanged) |

## What are the new Making Tax Digital (MTD) rules for 2026?

Making Tax Digital mandates that landlords with gross income over £50,000 use compatible software to file property updates quarterly from April 2026. This administrative shift aims to digitalise the tax system and reduce manual submission errors.

Landlords who meet the gross annual property income threshold must take several procedural steps to ensure full compliance with the new HMRC regulations:

1. **Calculate Gross Rental Income**: Landlords must calculate aggregate gross rental income from all properties, before expenses, to determine if they exceed the £50,000 threshold.
2. **Acquire MTD-Compatible Software**: Secure digital software that integrates directly with HMRC systems to record your daily rental transactions.
3. **Submit Quarterly Updates**: Submit summary updates of your business income and expenses to HMRC every three months through your chosen digital software.
4. **File Annual Declarations**: Finalise your property business tax position with an annual digital tax declaration instead of a traditional Self Assessment tax return.

## How do the new property income tax rates for 2027/28 work?

From 6 April 2027, personal property income will be taxed under separate rates that are 2 percentage points higher than standard rates. This major tax restructuring is legislated by the Finance Bill, inserting new section 6D and section 11CA into the Income Tax Act 2007.

This means standard non-property income like a salary remains taxed at standard rates of 20%, 40%, and 45%, but your personal rental profits will be subjected to the new increased property tax bands. Additionally, any standard personal tax reliefs and allowances must be applied to your employment or trading income first, before being set against your property income.

| Income Tax Band | Standard Rate (2026/27) | New Property Tax Rate (from 2027/28) |
| --- | --- | --- |
| Basic Rate | 20% | 22% |
| Higher Rate | 40% | 42% |
| Additional Rate | 45% | 47% |

## How does the Section 24 mortgage relief change from April 2027?

Section 24 mortgage interest relief will increase to a 22% tax credit to match the new, higher property basic tax rate. This adjustment scales up the individual relief value to prevent basic rate mismatch under the new legal framework.

To understand how the adjusted Section 24 rules apply to your personal property portfolio, execute the following calculations during your tax preparation:

1. **Separate Mortgage Interest**: Identify and isolate the total eligible finance and mortgage interest costs incurred across your rental properties.
2. **Calculate Property Tax Liability**: Calculate your gross property tax liability under the new 2027/28 property tax rates of 22%, 42%, or 47%.
3. **Apply the 22% Tax Credit**: Reduce your property tax liability by applying a flat tax credit of 22% of your calculated mortgage interest costs.
4. **Determine Net Tax Payable**: Assess your final tax bill, noting that while the relief rate increases to 22%, your overall tax profit is charged at higher marginal rates.

## What is the financial impact of the 2027 tax hike?

A standard £20,000 net rental profit will generate an extra annual tax bill of £200 for basic-rate taxpayers and £400 for higher-rate taxpayers. These figures illustrate the direct cash outflow resulting from the 2 percentage point tax increase starting in April 2027.

The table below compares the annual tax liability for a basic-rate landlord (paying 22% vs 20%) and a higher-rate landlord (paying 42% vs 40%) based on £20,000 in net rental profits, assuming standard personal allowances are already fully utilised.

| Taxpayer Category | Tax Bill under Current Rates | Tax Bill under 2027/28 Rates | Net Annual Tax Increase |
| --- | --- | --- | --- |
| Basic-Rate Landlord | £4,000 | £4,400 | £200 |
| Higher-Rate Landlord | £8,000 | £8,400 | £400 |

## Should I incorporate my property business into a limited company?

Incorporating into a limited company protects rental income from the new 2027 property rates, but incurs transfer taxes and business setup fees. Landlords must evaluate if long-term income tax savings outweigh immediate restructuring costs.

If you are deciding whether to transition your property business assets into a limited company structure, you must carefully evaluate these steps:

1. **Evaluate Corporation Tax vs Personal Tax**: Compare corporation tax rates on business profits against the new 22% to 47% personal property tax rates.
2. **Calculate Capital Gains Tax (CGT)**: Assess the CGT liability triggered when transferring personally owned properties into a new corporate structure.
3. **Assess Stamp Duty Land Tax (SDLT)**: Calculate potential SDLT payable when the company purchases the properties from you at fair market value.
4. **Review Mortgage Refinancing Costs**: Compare the interest rates and arrangement fees of corporate mortgages against your current personal mortgage terms.

### Does the property tax rate increase apply to Scotland?

No, the new property tax rates starting 6 April 2027 specifically apply to England, Wales, and Northern Ireland, as Scotland sets its own devolved income tax rates and bands.

### How does the priority order of allowances change in 2027?

From 6 April 2027, landlords must apply their personal allowances and reliefs to employment or trading income first, before setting any remainder against property income.

### What is the Making Tax Digital threshold for landlords in 2027?

The Making Tax Digital gross income threshold for landlords drops to £30,000 starting from the 2027/28 tax year, bringing more small landlords into scope.

### Are limited companies exempt from the new 2027 property income tax rates?

Yes, limited companies are exempt because company profits are subject to UK Corporation Tax, not the personal property income tax rates which only apply to individuals.