UK to raise property income tax by 4% from 2027
The Treasury will increase the basic rate of property income tax to 24% and higher rates to 44% and 49% starting April 2027, aiming to raise about £1 billion annually.
The UK government announced a further 2% rise in tax on rental income, bringing the total increase to 4% from April 2027. Chancellor John Healey said the change is intended to generate an additional £1 billion a year for the Treasury and will raise the basic rate of property income tax to 24%, the higher rate to 44% and the additional rate to 49%.
Healey presented the measure as part of a "breathing space" Budget that also includes a £100 energy payment for households in council tax bands A to D and a pledge not to raise taxes on working people. The Treasury estimates the combined effect of this and last year’s 2% increase will bring in £575 million by 2028-29, on top of the £500 million expected from the earlier rise.
Industry reaction was critical. Nimesh Shah, chief executive of Blick Rothenberg, described the increase as a "final nail" for some buy-to-let landlords, noting that mortgage-interest relief restrictions already push effective tax rates above 50% for some owners. Greg Tsuman, managing director for lettings at Martyn Gerrard, called the move "lunacy" and warned it could force landlords out of the market. Marc von Grundherr of Benham and Reeves said landlords have been "kicked while they’re down" and warned that reduced investment could shrink rental stock and push rents higher.
The Office for Budget Responsibility warned that the cumulative tax hikes could lead to a "steady rise" in rents, as some landlords exit the market and remaining owners gain greater pricing power. It also noted that prospective landlords may be deterred, further limiting long-term supply.
The National Residential Landlords Association chief executive Ben Beadle said the policy would make life harder for renters and could reduce rental supply amid strong demand. The government, however, pointed to other measures to support renters, including £4.7 billion for first-time buyers through the Your First Home equity loan scheme and unchanged tax rates on dividends and employment income.