Budget 2026

Budget 2026: What It Means for Landlords Who Own Property Personally and Through a Limited Company

Published following the Budget on 28 October 2026

The Budget 2026 is the second Budget in a row landlords have been the target of a tax hike. The Chancellor has confirmed that the rates of tax on income from property and savings will be increased by a further 2 percentage points from April 2027 (on top of the 2% increase announced in the November 2025 Budget). Tax on dividends and on employment income is unchanged.

The detail is contained in HMRC’s Budget 2026 Overview of Tax Legislation and Rates (OOTLAR) and its Annex A which sets out the rates and allowances for the 2026 to 2027 and 2027 to 2028 tax years. In this article we look at what has changed, what has stayed the same and what it all means to you regardless of whether you own your rental properties in your own name, in a limited company or both.

Landlords who own property in their personal name

New property income tax rates from 6 April 2027

From 6 April 2027 rental profits will no longer be taxed at the same rates as salary or pension income. They will be subject to separate “property rates”. The property rates were set at 22%, 42% and 47% in the November 2025 Budget and are increased by 2 percentage points in Budget 2026.

Band figures are based on the standard £12,570 Personal Allowance (source: HMRC, Budget 2026 OOTLAR Annex A).

For the 2026 to 2027 tax year there’s nothing to change in that respect. Rental profits will still be taxed at the normal rates of 20%, 40% and 45%.

Mortgage interest relief

Individual landlords can’t claim mortgage interest as a deduction against their rental income. What they can do is claim a basic rate tax credit (20%) on their finance costs. The government have said that this credit will continue to be in line with the property basic rate so it will be 24% from April 2027 rather than 20%. That’s a bit of a relief for the basic rate landlord. The higher and additional rate landlords will still be liable to tax at 44% or 49% on their profits prior to the interest deduction and will only be entitled to the 24% relief.

We’ll confirm the exact mechanics once the draft Finance Bill 2026-27 is out.

What this could cost you: a simple illustration

A landlord who is already a higher rate taxpayer via their employment. They have £20k of rental profits before mortgage interest and pay £10k of mortgage interest each year.

Illustration only. Assumes all of the rental income is in the higher rate band, ignores all other reliefs and assumes the finance cost relief is at the property basic rate.

In this case the landlord pays £400 more tax each year. The landlord’s actual cash profit after interest is £10,000 so the £6,400 tax bill is 64% of what they actually keep. That’s the combined effect of the new rates and the restriction on mortgage interest relief which is why the highly geared, higher rate landlord is the one who is worst off.

Frozen thresholds

Personal Allowance: £12,570 (withdrawn by £1 for every £2 of income over £ 100k) Basic rate band: £ 37,700 Additional rate threshold: £100,000 (for both 2026/27 and 2027/28) As rents continue to go up the frozen thresholds will see more landlords move into the higher rate band where the new 44% rate will apply.

Property held in trust

Landlords operating via a trust should be aware that from 2027/2028 the trust property basic rate will be 24% and the rate on accumulated or discretionary property income will be 49%.

Scottish taxpayers

Landlords who are Scottish taxpayers are subject to the different income tax rates and bands which are set by the Scottish Parliament. If you are a Scottish taxpayer please get in touch with us to find out how the new property rates will apply to you.

Capital Gains Tax and Inheritance Tax: no change

Capital Gains Tax on the sale of residential property is unchanged. The rates are as before at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers and the annual exempt amount is still £3,000. The Inheritance Tax thresholds are also unchanged with the nil rate band at £325,000 and the residence nil rate band at £175,000.

Landlords who own property through a limited company

Corporation Tax rates maintained

Company landlords are pretty much untouched by the new property income rates as they only apply to income tax. Companies are still subject to the small profits rate of 19% on profits up to £ 50k and the main rate of 25% on profits over £ 250k (with marginal relief in between). These rates are confirmed for the 2026/2027, 2027/2028 and 2028/29 tax years.

Companies can also continue to claim the full amount of mortgage interest as a business expense rather than being entitled to the limited tax credit available to individual landlords.

Dividend tax unchanged

The vast majority of company landlords will take their profits out as dividends. The dividend tax rates stay at 10.75% (the basic rate), 35.75% (the higher rate) and 39.35% (the additional rate) for both 2026/2027 and 2027/2028 and the dividend allowance remains at £500. As this latest increase didn’t cover dividends the gap between owning property personally and owning it via a company has increased yet again.

Annual Tax on Enveloped Dwellings (ATED)

Companies who own residential property worth over £500k will be liable to ATED (the Additional Tax on Property). Many legitimate letting businesses will be entitled to relief though. The annual charge will increase by 3.5% from 1 April 2027 in line with inflation.

Remember that a return must still be filed each year in order to claim relief from ATED even where no tax is payable.

Stamp Duty Land Tax

Stamp Duty Land Tax rates are unchanged. The 5% surcharge on additional residential property still applies and companies buying a dwelling for over £500k will still be subject to the flat 17% rate (unless of course they’re entitled to some relief, e.g. the relief available where property is let on a commercial basis).

Capital allowances

For companies who own furnished holiday lets in place prior to the regime being abolished, the main rate writing down allowance for plant and machinery (commercial property or plant in the common parts of residential buildings) will fall from 14% to 12% for the 2027/28 tax year.

Personal name or limited company: has the balance shifted?

For landlords who are reinvesting their profits rather than spending them a company is now a lot more tax efficient. A company paying 19% corporation tax is a lot better than an individual paying 44% on their rental profit (before you even get into the mortgage interest allowance).

The picture is a bit more even if you’re trying to extract all the profit. A higher rate taxpayer extracting company profits at 19% would be liable to 35.75% dividend tax on the remainder, giving a combined rate of about 48%. If the company pays 25% corporation tax the combined rate is a bit closer to 52%. Whether or not a company makes sense therefore is very much down to how much income you require, the level of your mortgage, your other income and your longer term plans for the portfolio (including the passing on to the next generation).

Should you put your properties into a company?

Many landlords will now be asking whether they should go down the route of incorporation. It can be the right move for some, but it’s rarely straightforward and there are real risks that need to be considered very carefully.

• Capital Gains Tax. A transfer of property into a company is a deemed sale at market value. Incorporation relief is available to defer the gain, but only if the letting activity constitutes a genuine business. HMRC will be very keen to assess whether that test is in fact met.
• Stamp Duty Land Tax. The company will generally pay SDLT on the market value of the properties (including the 5% surcharge and, in some cases, the 17% rate for higher value dwellings). Reliefs may be available in certain partnership circumstances but these are complex and HMRC will look at them very closely.
• Schemes promoted to landlords. HMRC have publicly warned about schemes which are marketed as a way of getting properties into a company without paying tax. If HMRC do successfully challenge the arrangement you could end up with the original tax liability (plus interest and penalties) and the cost of the scheme itself.
• The existing personal mortgages would generally be redeemed and replaced with company borrowing which could involve early repayment charges, new arrangement fees and different interest rates.
• Ongoing costs and extraction. The companies have higher running costs and filing obligations and if you take the profits out they’re taxed twice.

Every situation is going to be different and the right answer is going to be dependent on your own individual circumstances. We would strongly recommend seeking advice prior to making any changes.

Key dates

What should you do at this stage?

The new rates don’t come into effect until April 2027 so there’s plenty of time for landlords to plan. It’s a good time to take a look at your portfolio, at the level of income you require and whether your current structure is still the most tax efficient one for you and your family.

At UK Landlord Tax we’ve been specialists in landlord tax for over 16 years. If you’d like to talk about how Budget 2026 affects you (regardless of whether you own property in your own name, via a limited company or both) then please don’t hesitate to get in touch with us.

Important information

This article is based on the Budget 2026 documents published by HMRC on 28 October 2026. The measures announced are proposals and will not become law until the Finance Bill 2026-27 receives Royal Assent (at which point the final legislation may be different). The article is for general information only and is not tax advice. You should obtain professional advice based on your own circumstances prior to taking any action.

Thandi Nicholls Ltd
Creative Industries Centre
Glaisher Drive
Wolverhampton
West Midlands
WV10 9TG