By Sarah Macklin 
The government has confirmed that from April 2027, landlords will face a 2% rise in income tax on rental profits on their let properties.
Ministers say it’s about fairness. Many landlords say it’s the last thing the sector needs. And for tenants already grappling with high rents, the knock-on effects could be significant.
Here’s what homeowners, landlords and anyone watching the rental market should know.
The new tax rates
From 2027, property income will be taxed at:
- 22% for basic-rate taxpayers (up from 20%)
- 42% for higher-rate taxpayers (up from 40%)
- 47% for additional-rate taxpayers (up from 45%).
The government says this change brings property and savings income more in line with earnings, which are subject to National Insurance. Chancellor Rachel Reeves described the move as part of a broader effort to close this gap, noting that rental income has benefited from historically lower tax burdens.
Why industry groups are concerned
The National Residential Landlords Association (NRLA) warned the move will tighten profit margins even further, particularly for smaller landlords who’ve already absorbed rising mortgage rates and reduced mortgage-interest relief. According to the NRLA, the change could push rents up by £20 to £25 per month for the average tenant.
Critics suggest the rise will push some landlords to exit the sector entirely, shrinking the supply of rental homes when demand is still very high.
What property experts are saying
London property expert Jessica Hall of J Property Management was blunt in her assessment, calling the change “a backward step”.
As she puts it:
“For many landlords, especially smaller private landlords, it’s more than just a bit of extra tax; it could be the straw that finally breaks the camel’s back.”
She points to rising running costs across the board:
“After years of rising mortgage rates […], limits on interest-offsetting, increased regulations (which we support, but which carry real costs) and already-squeezed margins, another tax rise risks pushing marginal landlords out of the market.”
And she warns the effects won’t just be felt by landlords:
“That isn’t just bad news for landlords, it could reduce the supply of available housing and force rents up at a time when many tenants are already under pressure.”
Her conclusion is clear:
“If the Government claims to support rental affordability and a healthy private-rented sector, this feels like the wrong direction.”
Likely impact on rents
If landlords’ costs rise, rents tend to follow. While not every landlord will increase prices immediately, many will feel they need to recoup the difference to keep their properties viable. The NRLA’s suggested uplift of £20 to £25 per month could become standard across much of the market.
How the supply of rental homes may change
A steady trickle of landlords leaving the sector has already been documented over the past few years. Layering a higher tax burden on top of today’s elevated interest rates and regulatory costs could accelerate that trend.
Fewer rental properties on the market and no fall in demand means more competition for homes.
That typically means higher rents and longer waiting lists.
Other tax measures in the same budget
The tax rise for landlords wasn’t the only announcement affecting property owners. The government also introduced:
- A “mansion tax” on properties worth more than £2 million
- Higher taxes on savings and dividends
- An extended freeze on income-tax thresholds
Together, these measures mark a notable tightening of the UK’s wider tax regime.
What landlords should do next
It’s worth crunching the numbers now, well ahead of 2027. Consider:
- Reviewing mortgage arrangements
- Modelling expected post-tax returns
- Planning rent adjustments sensitively and transparently
- Seeking advice if you’re unsure how the rules affect you personally.
For some landlords, this will be manageable. For others, it may shape whether staying in the market still makes financial sense.
