Property Income Tax Rates from 2027

What is changing?

Property income — rent less allowable expenses — is currently added to other income and taxed at the ordinary income tax rates, which for Scottish taxpayers are the Scottish rates. From April 2027 it is to be taxed as its own category with separate rates, in the same way as savings and dividends.

In England, Wales and Northern Ireland the rates are 22% (basic), 42% (higher) and 47% (additional). The Section 24 tax credit for finance costs is to be given at 22%.

What about Scotland?

Scottish taxpayers currently pay Scottish rates on rental profit. The Finance Act 2026 sets the new rates for England, Wales and Northern Ireland and gives the Scottish Government the power to set Scottish property income rates. Until the Scottish Budget sets them, Scottish landlords cannot be certain of the rate, but should plan for an increase rather than a cut.

Who is affected most?

Higher-rate landlords with mortgaged portfolios feel it twice: a higher rate on profit and Section 24 relief that does not rise with it. Basic-rate landlords pushed over a threshold by the change in band order should also check their position.

Landlords holding property through a limited company pay Corporation Tax on profits and are not directly affected, though extracting profits as dividends is taxed at the higher dividend rates in force since April 2026.

What to do now

Run your 2027/28 rental profit through the new rates, and compare personal ownership, joint ownership with a spouse, and a company structure. Incorporation has its own costs — LBTT and the Additional Dwelling Supplement, and CGT on transfer — so it is rarely right for small portfolios.