Landlords face a further tax rise: what the Budget means for property and dividend income
If you own rental property, the Autumn Budget brought another tax rise to plan for. Last year's Budget had already announced a two percentage point increase in the tax on property income from April 2027. This year, the Chancellor doubled it.
Here's what's changing, how it affects landlords who own property personally and through a company, and what you can do now.
The new rates on property income
From 6 April 2027, property income will have its own income tax rates, separate from the rates on salaries and pensions:
Basic rate: 24% (currently 20%, and previously set to rise to 22%).
Higher rate: 44% (currently 40%, previously set to rise to 42%).
Additional rate: 49% (currently 45%, previously set to rise to 47%).
The new rates apply in England, Wales and Northern Ireland. Tax on savings income is rising by the same amount from the same date, so landlords holding cash on deposit will feel it there too.
What this means: A higher rate landlord with £10,000 of rental profit currently pays £4,000 in income tax. From April 2027, that becomes £4,400.
Mortgage interest relief rises too, but not by enough to offset it
Since the Section 24 rules came in, individual landlords can't deduct mortgage interest from their rental income. Instead, they get a tax credit at the basic rate. From April 2027, that credit rises from 20% to 24%, in line with the new basic rate.
That helps a little, but higher and additional rate landlords still lose out. For example, take a higher rate landlord with £20,000 of rental profit before mortgage interest and £8,000 of mortgage interest, with all of the profit taxed at the higher rate:
2026/27: £20,000 at 40% is £8,000, less a £1,600 credit (20% of £8,000), giving a tax bill of £6,400.
2027/28: £20,000 at 44% is £8,800, less a £1,920 credit (24% of £8,000), giving a tax bill of £6,880.
That's £480 more a year from this one property, and the gap widens as rental profits grow.
No help from the property allowance
While the trading allowance is tripling to £3,000 from April 2027, the £1,000 property allowance hasn't changed. And with income tax thresholds frozen, rising rents mean more landlords will gradually be pulled into the 44% higher rate band.
What about dividend tax?
This Budget didn't change dividend tax. The rates already went up by two percentage points in April 2026, and for 2026/27 and 2027/28 they stay at:
Basic rate: 10.75%.
Higher rate: 35.75%.
Additional rate: 39.35%.
Dividend allowance: £500.
This matters if you own property through a limited company. Rental profits in a company are taxed at Corporation Tax rates of 19% to 25%, which haven't changed, so the new property income rates don't apply. But when you take profits out as dividends, you pay dividend tax on top.
The government has also confirmed it will reform how company distributions are taxed from April 2028, with draft legislation expected in 2027. Details are still to come, but it could affect how company owners take money out or restructure in the future.
Should you move your properties into a company?
The gap between personal and company ownership is widening, so it's a question many landlords will be asking. But incorporating is rarely simple. Transferring properties into a company can trigger Capital Gains Tax and Stamp Duty Land Tax, usually means refinancing, and leaves you paying dividend tax to access the profits. For some landlords it makes sense; for many, the costs outweigh the savings. It needs to be looked at case by case.
What you can do now
Work out what your 2027/28 tax bill could look like at the new rates, so the increase doesn't come as a surprise.
Make sure you're claiming every allowable expense. HMRC's figures suggest many landlords claim no expenses at all.
If you own property jointly with a spouse or civil partner, review how the income is split. Moving more income to a lower rate taxpayer can reduce your overall bill, but it must reflect genuine ownership.
Think about timing. Allowable costs incurred after 6 April 2027 will save tax at the new, higher rates.
Consider personal pension contributions, which can keep more of your income in the basic rate band.
Check whether Making Tax Digital applies to you. The threshold falls to £30,000 of qualifying income from April 2027.
At BlueFox Accounting, we work with landlords to plan ahead, keep their records in order and choose the right ownership structure for their portfolio. If you'd like us to model the impact of the Budget on your rental income, get in touch.