The tax increase on rental income announced in the latest Budget is relatively modest but comes on top of a previous rise announced by Rachel Reeves. They come into force next year and, together, they will add up for landlords with larger portfolios.
New analysis by The Letting Partnership, a lettings accounting specialist, reveals that landlords could face almost £500 in additional annual tax per property, rising to nearly £3,500 for larger portfolios.
So, what exactly are the changes, and what do they mean for landlords?
How much more tax will landlords pay?
In her November 2025 Budget, Rachel Reeves announced that income tax on rental profits would rise by two percentage points from April 2027, taking the basic, higher and additional rates to 22%, 42% and 47% respectively.
The Autumn Budget has now added another two percentage points to each rate, also from April 2027, bringing the total increase to four percentage points.
The new property income tax rates will be:
Basic rate: 24%, up from the current 20%.
Higher rate: 44%, up from 40%.
Additional rate: 49%, up from 45%.
These will apply to personally owned rental properties in England, Wales and Northern Ireland. Landlords operating through limited companies, though, will be unaffected by the changes.
What does this mean for an average buy-to-let property?
To assess the financial impact, The Letting Partnership based its analysis on a buy-to-let property valued at £250,000 that generates £1,406 in monthly rent.*
This produces annual rental income of £16,872.
After deducting typical operating expenses, including £1,687 in management fees, £2,500 for repairs and maintenance, £285 for insurance and £300 in professional fees, the property generates approximately £12,100 in taxable rental profit.
Under the current 20% basic income tax rate, the landlord would pay £2,420 in tax.
From April 2027, that bill would rise to £2,904, an increase of £484 annually, or just over £40 a month.
For higher-rate taxpayers, the tax bill on the same rental profit would rise from £4,840 to £5,324. At the additional rate, it would increase from £5,445 to £5,929.
This means landlords in all three tax bands would pay the same additional £484, assuming the rental profit is taxed entirely within the relevant band.
One less-publicised aspect of the changes is that the relief rate on mortgages will also rise from 20% to 24%, which will help offset some of the tax increase.
If that is added into the equation, landlords in all tax brackets who are paying £6,000 a year in mortgage interest would see their tax relief rise from £1,200 to £1,440. That would cut the tax rise almost in half from £484 per annum to £244.
The impact on larger portfolios
Although the increase is relatively small for a single rental property, it will be more significant for landlords with multiple properties.
The Letting Partnership has calculated the impact on the average portfolio of 7.2 properties.**
Assuming each property generates the same rental profit, the additional annual tax bill would be £3,485, of which approximately £1,742 is attributable to the latest Budget.
These figures exclude mortgage interest relief. If each property had £6,000 in qualifying annual mortgage interest, as in the earlier example, the combined tax increase would fall to approximately £1,757, assuming the full relief could be claimed.
Another cost for property investors
The tax rises come alongside higher borrowing and maintenance costs and the additional responsibilities introduced by the Renters’ Rights Act.
And, with further regulatory requirements still to come, including the national landlord registration system, property investors face additional costs and obligations at a time when rental profitability is already under pressure.
Chris Mason, chief operating officer at The Letting Partnership, warns that the cumulative financial impact could damage landlord confidence, discourage further investment and ultimately reduce the supply of rental homes.
He argues that the government needs to consider the combined effects of taxation and regulation on the financial viability of rental property ownership.
