Budget 2026: Landlords dealt a further tax blow
Swift Capital® 3 min read
The key announcement is a further 2 percentage point increase in income tax on rental and savings income from 6 April 2027. This is on top of the 2 point rise announced in last year’s Budget. As a result, landlords holding property in their own names will pay 4 points more than they do today and additional-rate taxpayers face tax of up to 49% on rental income.
| Taxpayer | Current Rate | Planned Rate (2025 Budget) | New Rate |
|---|---|---|---|
| Basic Rate | 20% | 22% | 24% |
| Higher Rate | 40% | 42% | 44% |
| Additional Rate | 45% | 47% | 49% |
Who Is Affected?
Individual landlords holding residential investment property in their personal names. Property held in a limited company is unaffected because companies pay corporation tax on rental profits.
What It Means
For every £100,000 of rental profit taxed at the additional rate, the annual bill rises by £2,000 compared with the rates already planned and by £4,000 compared with today’s rates.
The increase adds to the punitive effect of Section 24. Private landlords cannot deduct mortgage interest from rental income. Instead, they receive a tax credit at the basic rate, which will be 24% from April 2027. A higher-rate landlord therefore will pay 44% on profits but receive only 24% relief on interest. Consequently, some landlords are pushed into a higher tax band or lose part of their personal allowance.
| Feature | Personal Ownership | Limited Company Ownership |
|---|---|---|
| Mortgage Interest Relief | Basic-rate tax credit only (s24) | Generally fully deductible |
| Tax on Rental Profits | Up to 49% from April 2027 | Corporation tax rates apply |
| Retained Profits | Taxed immediately as personal income | Can be kept in the company for reinvestment |
| Administration | Relatively simple | Additional accounting, compliance and filing |
| Access to Funds | Income belongs directly to owner | Additional tax on dividends or salary |
A limited company structure tends to suit higher and additional-rate taxpayers with significant borrowing, where profits are being retained for reinvestment and the portfolio is growing. However, transferring properties into a company can trigger Capital Gains Tax and Stamp Duty, corporate mortgages are often more expensive and there will be additional accountancy, compliance and administrative costs. For smaller landlords with modest rental profits and limited borrowing, personal ownership can remain the better option. Take specialist advice before restructuring.
Is It Time To Sell?
For many landlords the tax rise adds to an existing problem; under Section 24, it is possible to pay tax while losing money. A landlord receiving £1,500 a month in rent with £300 of running costs and a £1,400 interest-only mortgage, is £200 a month out of pocket. Yet HMRC sees £1,200 a month of taxable profit, so a higher-rate landlord pays around £240 a month in tax on top of the shortfall.
Higher rates are not the only reason to sell. The vendors we speak to often describe the stress and time of managing a difficult tenant, disrepair claims (some which are spurious) and the mounting cost of possession proceedings once started.
Swift Capital® buys tenanted property throughout the UK, including those with sitting tenants, rent arrears, tenant disputes, disrepair, live possession proceedings or rent challenges. Contact us to sell your property in confidence and receive a free, no-obligation offer.
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