What the 2027 property income tax changes could mean for landlords

Landlords have faced a number of tax and regulatory changes in recent years, from restrictions on mortgage interest relief and changes to capital gains tax (CGT) rules, through to the abolition of the furnished holiday let regime and the introduction of Making Tax Digital (MTD) for Income Tax.

From 6 April 2027, another significant change is scheduled to take effect with the introduction of separate income tax rates for property income. While the increase is relatively modest, it is likely to be a factor for landlords to consider when reviewing the profitability of their portfolios, future investment plans and ownership structures.

What is changing?

From the 2027/28 tax year, rental income will no longer be taxed at the standard income tax rates applicable to employment income and trading profits. Instead, property income will be subject to separate tax rates:

The new rates are expected to apply to taxable rental profits from residential and commercial property held personally by landlords in England, Wales and Northern Ireland.

The Scottish Government have the power to determine the income tax rates applicable to property in Scotland. No announcements have currently been made in respect of a change to Scottish rates applicable to properties in Scotland.

Why are property income tax rates increasing?

According to the Government, the reforms are intended to narrow the gap between the tax paid on earned income and income generated from assets such as property.

Rental income is not subject to national insurance contributions, therefore the changes are designed to bring the overall tax treatment of property income closer to earned income.

The cumulative impact on landlords

The increase in property income tax rates is not the only thing impacting landlords. Many landlords are already adapting to a range of tax, regulatory and commercial pressures, including:

• Restrictions on mortgage interest relief
• The abolition of the furnished holiday let tax regime
• Reporting requirements under MTD
• Higher borrowing costs
• Ongoing maintenance, repair and compliance obligations

Viewed individually, the rate increase may appear relatively small. However, when considered alongside these wider changes, the overall impact on profitability and administration may be more significant.

What does this mean in practice?

For some landlords, the increase may simply reduce annual post-tax profit. For others, particularly portfolio landlords and higher-rate taxpayers, it could prompt a wider review of investment strategy and ownership structures.

Key considerations may include:

Reviewing portfolio profitability

Properties that previously generated acceptable returns may become less attractive once higher property income tax rates are factored in.

Now may be an appropriate time to revisit projected yields, cashflow forecasts and the long-term viability of underperforming assets.

Assessing ownership structures

Many landlords may wish to revisit whether personal ownership remains the most efficient structure with the changes in mind.

For some investors, operating through a limited company may become more attractive, particularly where profits are retained for future investment.

Corporation tax rates remain significantly below the new higher property income tax rates. However, incorporation carries tax and commercial implications of its own and is not suitable for every landlord. Specialist advice should always be sought before making structural changes.

Planning for Making Tax Digital

Alongside the tax rate increases, more landlords will be brought into MTD.

Landlords with qualifying income above £30,000 will be required to comply with MTD from April 2027 (£50,000 and over from April 2026), bringing digital record-keeping and quarterly reporting requirements into scope.

For many landlords, these additional compliance obligations will become an increasingly important part of future planning.

Time to review your position

Although April 2027 may still seem some way off, the changes provide an opportunity for landlords to review how their property investments are structured and understand the potential impact on future returns.

The impact depends on personal circumstances. For some landlords, the effect may be relatively modest. For others, particularly those with larger portfolios or higher-rate tax exposure, the changes could influence decisions around ownership structures, future acquisitions and longer-term tax planning.

We’re here to help

Whether you own a single buy-to-let property or a larger portfolio, understanding how the tax changes could affect you is an important part of long-term planning. Our specialists can help you assess the impact of the new rates, review your current ownership structure and identify opportunities to plan ahead of April 2027.

Azets also offers dedicated MTD for Income Tax packages, whether you want to manage your own records with expert oversight, outsource compliance entirely, or combine compliance support with ongoing business and wealth planning advice. Our specialists can help you select the right software, meet your reporting obligations and prepare for the transition with confidence.

Speak to your usual Azets adviser or contact via the form below to discuss your situation.