If you own residential rental property, an important tax change is due to take effect from 6 April 2027. Following the Autumn Budget 2025, the Government is introducing separate Income Tax rates for taxable property income, meaning many individual landlords could pay more tax on their rental profits.

Understanding how these changes work can help you plan ahead and review whether your current ownership structure remains the most suitable for your circumstances.

What’s Changing from April 2027?

From 6 April 2027, separate Income Tax rates will apply to taxable property income for individuals in England, Wales and Northern Ireland:

• Basic Rate: 22% (currently 20%)
• Higher Rate: 42% (currently 40%)
• Additional Rate: 47% (currently 45%)

These rates apply to taxable rental profits after allowable expenses have been deducted.

Personal Allowance Changes

The Government is also changing the way Personal Allowances and certain reliefs are applied.

From April 2027, they will generally be set first against employment, trading and pension income before being applied to property income. As a result, some landlords may find that more of their rental profits become taxable.

Example

Suppose a landlord has £20,000 of taxable rental profit and remains within the basic-rate band.

• Under the current rules, Income Tax would generally be £4,000.
• From April 2027, the same profit would generally attract £4,400 of Income Tax.

This represents an additional £400 of tax before taking into account any other changes to the individual’s tax position.

Individual Ownership vs Limited Company

Many landlords are reviewing whether they should continue owning property personally or through a limited company.

Individual Ownership

• Property profits are taxed at the new property income tax rates from April 2027.
• Mortgage interest restrictions continue to apply to most residential landlords.
• Personal Allowances and tax bands affect the final tax payable.

Limited Company Ownership

• Rental profits are subject to Corporation Tax.
• Profits can be retained within the company for reinvestment.
• Further personal tax may apply when profits are extracted as dividends or salary.

Whether incorporation is beneficial depends on many factors, including existing mortgages, Capital Gains Tax, Stamp Duty Land Tax, future plans and overall income. Professional advice should always be sought before making structural changes.

Why This Matters

The new property income tax rates, together with existing mortgage interest restrictions and frozen tax thresholds, may increase the tax burden for many individual landlords.

These changes could influence decisions about:

• Portfolio growth.
• Rental pricing.
• Ownership structures.
• Long-term investment planning.
• Succession planning.

Reviewing your position before the new rules take effect may help you make informed decisions.

How Business Management Consultation Can Help

At Business Management Consultation, we help landlords understand the impact of tax changes and plan ahead with confidence.

Our services include:

• Calculating the impact of the new property income tax rates.
• Reviewing whether personal or company ownership is more appropriate.
• Tax planning for landlords.
• Property portfolio reviews.
• Corporation Tax and Self Assessment advice.

Every landlord’s circumstances are different, and tailored advice can help you choose the most suitable approach.

Conclusion

The introduction of separate property income tax rates from April 2027 represents a significant change for individual landlords. Combined with changes to the application of Personal Allowances and existing tax rules, many property owners may see an increase in their tax liabilities.

Planning ahead now can help you understand the financial impact and determine whether your current ownership structure continues to meet your long-term objectives.

Call us today on 01273 777 333 to discuss how these changes could affect your property portfolio and explore your planning options.