John Healey’s 2026 Budget will increase income tax on property income for private landlords who own property in their own name from 6 April 2027.
Taxation of property income for limited company landlords is unchanged.
Rachel Reeves added 2% to income tax on property income in her 2025 budget. John Healey has done the same, adding another 2%.
On 6 April 2027, the rates of income tax on property income in England, Wales and Northern Ireland will be 24% (basic rate), 44% (higher rate) and 49% (additional rate). The rates on earnings do not change. The rates for property income will apply to the top slice of income for an individual. The same rates will apply for interest on savings outside of an ISA.
The tax reduction for mortgage interest (the 20% credit that replaced full relief under section 24) is expected to follow the basic property rate up to 24%. HM Treasury’s guidance after Budget 2025 said the credit would rise to 22% with that increase; HMRC has not yet published anything on the further two points, so treat 24% as expected rather than confirmed.
| Own name (unincorporated) | Limited company | |
|---|---|---|
| Tax on rental profit | Income tax | Corporation tax |
| Rates to 5 April 2027 | 20% / 40% / 45% (property income rates for 2026-27 are the same as earnings) | 19% up to £50,000 profit; 25% above £250,000; marginal relief between |
| Rates from 6 April 2027 | 24% / 44% / 49% | 19% / 25%, unchanged |
| Mortgage interest | Not deductible. Tax credit of 20% of finance costs, expected to rise to 24% from April 2027 (not yet confirmed by HMRC) | Deducted in full as a business expense |
| Withdrawing money | Rental profit is yours after income tax | Salary or dividends, taxed again personally. Dividend rates 10.75% / 35.75% / 39.35% after the £500 allowance (2026-27) |
| Selling a property | Capital gains tax at 18% / 24% after the £3,000 annual exempt amount | Corporation tax on the gain at 19% / 25%; a further tax charge to extract the proceeds |
| What changed in the 2026 Budget | Another 2 percentage points on rental profit from April 2027 | Nothing |
Other Changes Announced
Information to HMRC
The government will consult on expanding third-party reporting requirements for property income data. The consultation, ‘Improving Property Income Data Reporting’ is live and runs until 20 January 2027.
HMRC already receives data on landlords from letting agents and tenancy deposit protection schemes. However, HMRC must currently issue a notice each time it wants the data.
The consultation also confirms that from April 2028, landlords with income over £20,000 will be brought into Making Tax Digital, and says the improved data will be used to prompt landlords within MTD and to identify people who have rental income but are not registered for self assessment.
Respond here: Improving Property Income Data Reporting — Design and Implementation – GOV.UK
Gas standing charges are going
The government has asked Ofgem to abolish gas standing charges on domestic energy bills, aiming for the end of 2027 or as soon as possible after that. Suppliers will recover the cost through gas unit rates instead. The Budget puts the average gas standing charge at £108 a year.
For landlords, the point is void periods. Between tenancies, the gas account is in your name, the boiler is ticking over on frost protection or off altogether, and you pay the standing charge regardless. Once it goes, an empty property with the gas barely used costs very little. The same applies to any period where you hold the account yourself, such as an HMO with bills included.
Electricity standing charges are not being abolished, although the government has said it will reform them and will set out details in 2027.
Mileage rates are increasing
If you claim mileage for journeys to your properties, the tax-free rates are rising. The 55p per mile rate for the first 10,000 business miles, introduced as a temporary measure in May 2026, is being made permanent from 6 April 2026.
What the Budget means for tenants
The National Living Wage will rise by 3.9% to £13.21 an hour on 1 April 2027. The National Minimum Wage for 18 to 20 year olds rises by the same percentage to £11.27.
Households in council tax bands A to D in England will receive a one-off £100 Household Energy Payment from January 2027, paid through the council tax system. Those who pay by direct debit will get it in their bank account without doing anything; everyone else will be invited by their council to apply. Full eligibility criteria are still to be published, but the government has said most households exempt from council tax, which would include full-time student households, will be covered.
Article abridged from The Independant Landlord: How the 2026 Budget impacts private landlords • The Independent Landlord