Landlord tax changes coming in 2027: what the new rates mean

From 6 April 2027, landlords across the UK will pay more tax on rental income. This isn't a rumour or a Budget briefing that might not survive the Finance Bill — it's confirmed law. Chancellor Rachel Reeves announced the change at the Autumn Budget on 26 November 2025, and it was legislated in the Finance Act 2026, which received Royal Assent on 18 March 2026. If you own a let property in Northumberland, here's exactly what's changing, what it will cost, and what it's worth thinking through before April 2027 arrives.

What's actually changing

From April 2027, the government is introducing separate tax rates for property income, two percentage points higher than the equivalent income tax bands:

• Basic rate: 20% → 22%
• Higher rate: 40% → 42%
• Additional rate: 45% → 47%

These rates apply specifically to rental profits, sitting alongside — but separate from — the normal income tax bands that apply to your salary, pension or other earnings. Around 2.4 million landlords are expected to be affected.

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Who this applies to

The new rates apply to landlords running an unincorporated property business — that's individuals and partnerships letting property in their own name, which covers the large majority of landlords in Northumberland. If you let through a limited company, nothing changes here: your company continues to pay corporation tax on its profits as before, which is one reason incorporation has become a more common conversation among local landlords with larger portfolios.

This isn't a proposal still working its way through Parliament. It received Royal Assent in March 2026 — the only thing left to happen is the April 2027 start date arriving.

The one piece of relief: mortgage interest credit rises too

Since 2020, landlords haven't been able to deduct mortgage interest from rental income directly — instead, they claim a tax credit worth 20% of their finance costs. From April 2027, that credit rises in line with the new property basic rate, from 20% to 22%. It's a genuine, if partial, cushion: a higher-rate landlord paying £10,000 a year in mortgage interest will see roughly £200 more back through the credit, offsetting some of the extra tax due on rental profit. It doesn't erase the increase, but it isn't nothing either.

What it means for rents

The Office for Budget Responsibility, which costed the measure alongside the Treasury, has been candid that landlords are likely to pass some of this on. Its own estimate is that the change could add somewhere between £20 and £25 a month to typical rents in England as landlords adjust pricing to protect their margins. Worth noting: a proposed additional 8% National Insurance charge on rental income was seriously considered ahead of the Budget and was not introduced — so this is a narrower change than many landlords had been bracing for.

What it means for landlords in Northumberland

We're a sales-focused agency, not a letting agent, so the compliance detail is a conversation for your accountant. But we're already seeing what this kind of change tends to trigger locally: landlords in towns like Blyth, Ashington and Cramlington running the numbers again on whether an individually-held rental still earns its keep once tax, mortgage costs and — since May 2026 — the Renters' Rights Act are all priced in together. For some, incorporating makes sense. For others, particularly those close to retirement or holding a single let property, selling with vacant possession once a tenancy allows it is the simpler route.

Either way, the decision starts with knowing two real numbers: what the property is actually netting you as a rental after April 2027's rates, and what it would achieve if you sold it today. Only one of those is guesswork until you get it valued.