Landlords face paying thousands of pounds more in tax over the coming decade following rate increases announced in this year's Autumn Budget.
Starting next April, individual landlords will see an additional two percentage points added to their rental income tax – on top of the previously announced two-percentage-point increase. This cumulative four-point rise lifts the basic property tax rate to 24%, the higher rate to 44%, and the additional rate to 49%.
That could take a significant chunk out of your rental profits. According to wealth management group Rathbones, the changes could cost landlords up to an extra £1,122 in the first year alone, £12,288 over a decade, and potentially nearly £36,000 across 25 years.
Here, we look at how the changes could affect your rental profits, where landlords face the biggest increases and five ways to cut your tax bill.
How will landlords be affected?
As a landlord, you must pay tax on the profit you make from renting out a property. Your rental income is currently taxed at the same rate as employment income, and it's added to any other earnings you have.
However, from April 2027, property income tax rates will rise above standard income tax rates. The changes won't apply in the same way to landlords paying Scottish income tax, as Scotland has different rates of income tax.
You'll continue to pay normal income tax rates on your salary and other earnings. You'll also still pay tax on your rental profits after allowable expenses have been deducted.
The new system addresses the fact that most private landlords don’t pay National Insurance, while most of their working tenants do. However, National Insurance may apply if your rental activity qualifies as running a business.
According to Rathbones' analysis, assuming an annual rent rise of 2%, the upcoming tax increase could cost landlords around £380 in the North East and £1,122 in London in the first year alone.
In the South East, landlords face an estimated £690 increase over 12 months, followed by £623 in the East of England. By comparison, properties in Yorkshire & the Humber and the East Midlands will see smaller increases of £417 and £445, respectively.
Across 25 years, this cumulative extra bill could rise to more than £12,000 in the North East and nearly £36,000 in London.
These figures are estimates rather than a prediction of what you'll pay. Rathbones’ projections are illustrative and don't factor in allowable expenses, the £1,000 property allowance or other personal reliefs. Your actual tax bill will depend on your total taxable income, the proportion of profits falling into each tax bracket and your eligible deductions.
How will tenants be affected?
Tenants could also feel the impact of higher landlord taxes through rising rents.
The Office for Budget Responsibility (OBR) warns that the changes could lead to a 'steady rise in rents' for tenants.
It says higher taxes could discourage new landlords from entering the market, reducing the supply of rental homes. Some existing landlords may also leave, giving those who remain more power to raise rents if demand continues to outstrip supply.
Average UK rents increased by 3.8%, to £1,406 in the 12 months to September 2026, according to the latest Office for National Statistics (ONS) data – unchanged from August.
According to a recent survey by Propertymark, around 57% of estate agents reported inquiries from landlords considering leaving the private rental sector following these tax hikes. Estate agency Savills forecast that average rental costs could rise by 15% between now and 2031 – with London seeing a 16% rise.
For renters, this adds to the wider cost of living pressures currently being faced.
Is buy to let still worth it?
Is buy-to-let still worth it?
Buy-to-let became increasingly popular throughout the 2010s due to ultra-low interest rates, post-2008 mortgage restrictions on first-time buyers, and a growing view of property as a safer retirement asset than stocks or pensions.
According to a Rathbones survey, property is playing an increasingly broad role in retirement planning.
Of those expecting to use property to fund retirement, 38% want to generate enough to maintain their desired lifestyle and 33% to cover essential outgoings. Looking specifically at later-life care, 35% expect to use a property sale and 18% equity release on their main home.
Most recently, landlords face more regulations, with the Renters’ Rights Act introduced in May this year. These new regulations include the removal of 'no-fault' evictions under Section 21, mandatory four-month notice periods and re-letting curbs if sales collapse.
Despite these changes, Allison Thompson, chief lettings officer at the National Residential Landlords Association (NRLA), noted that buy-to-let can continue to be a 'profitable long-term investment' for landlords.
This is because it's 'one of the few asset classes that can generate regular rental income while increasing in value over time' – provided investors structure their portfolios with careful planning.
How to save money on tax as a landlord
You can't legally avoid paying tax on your rental income, but you can reduce your bill by claiming allowable expenses, making the most of tax relief and considering how you own the property.
1. Hold the property in a limited company
This allows you to fully deduct mortgage interest as a business expense and pay corporation tax – starting at 19% on profits up to £50,000 and rising to 25% for larger profits.
However, moving existing properties into a company can trigger stamp duty and capital gains tax, and you may still face personal taxes when withdrawing profits as salary or dividends.
It's worth getting professional advice before making the switch, as the upfront costs could outweigh any potential tax savings.
2. Transfer ownership to a lower-earning spouse
If your spouse or civil partner pays a lower tax rate, transferring beneficial ownership of a rental property could mean more of your rental profits are taxed at your partner's lower rate than your higher or additional rate.
If you own a property jointly with your spouse or civil partner in unequal shares, you may need to provide evidence of those shares (such as a deed of trust) and submit HMRC's Form 17 to have the rental income taxed according to your actual ownership split.
3. Claim on maintenance costs
Routine repairs and like-for-like replacements – such as fixing a roof, replacing a broken boiler or repairing damaged guttering – are all tax-deductible against your rental profits in the year you pay for them.
Decorating can also qualify if it's maintaining your property's existing condition. Timing these jobs within higher-rate tax years can help to maximise your relief, saving you up to 44% or 49% of the repair bill (depending on whether you're a higher or additional-rate taxpayer).
4. Replacement of domestic items relief
You can claim the cost of replacing items such as sofas, beds, carpets, curtains, fridges and washing machines in a let house or flat.
The relief doesn't cover buying items for the first time or rooms let in your own home. If the new item is better than the old one, you can only claim the cost of an equivalent: replace a £400 sofa with a £550 sofa bed, and you can claim £400.
5. Claim rent a room relief
Under this scheme, homeowners or tenants who let furnished residential accommodation in their main home can receive up to £7,500 per year tax-free (reduced to £3,750 each if shared with a partner or another person).
It also covers guest houses or B&Bs run from your main home, provided the property is your primary residence, the rooms are furnished, and the space has not been divided into separate self-contained flats.
