New income tax rules for property – What they mean for landlords and property investors
Andy Noton, 20 January 2026
Andy Noton, 20 January 2026
The Government is introducing changes to how property income for individuals is taxed.
The Autumn Budget documents, said that the Government is “increasing taxes on property, dividend and savings income to narrow the gap between the tax paid on work and the tax paid on income from assets, raising revenue in a way that limits impacts on growth.”
From April 2027, property income will now be taxed at a higher rate and after employment and trading income, but before savings and dividend income.
The new tax calculation order is as follows:
Once these changes come into force property income will be taxed at the following rates:
Each of these rates is two percentage points higher than the “normal” income tax rate, adding complexity to the tax affairs of many.
While the Property Allowance and Rent a Room Scheme will remain unchanged, landlords must adjust to the fact that finance cost relief will be capped at the property basic rate (22 percent) as well.
The new rules will also impact how allowances, such as the personal allowance, are applied.
As the new priority shows, these will first be used against income from employment, trading or pensions.
Any remaining allowances will be used against property income or savings income, depending on what is most beneficial for the taxpayer.
Non-resident landlords will still be taxed on UK property income. Under the Non-Resident Landlords Scheme (NRLS), tax will be charged at the property basic rate.
Non-resident landlords can apply to receive rent gross and submit tax returns to pay any additional tax due.
Investors in property funds, such as Real Estate Investment Trusts (REITs) and Property Authorised Investment Funds (PAIFs), will also see their property income taxed at the property basic rate.
The Chancellor has stated these changes aim to ensure that income from assets is taxed fairly in relation to income from trades or employment. Landlords and investors will need to adapt to new tax rates and the changes to the quantum of finance cost relief.
It’s essential for landlords to review their tax positions and seek advice on how best to manage these changes to minimise potential liabilities.
For further guidance on how these changes will affect your property portfolio, get in contact with Partner, Andy Noton (andrewnoton@lubbockfine.co.uk).
