Key takeaway: From 6 April 2027, rental profits and savings interest get their own income tax rates: 24%, 44% and 49%, up from 20%, 40% and 45%. Budget 2026 (28 October 2026) added two percentage points on top of the 22%, 42% and 47% already set by Finance Act 2026. The property rates apply in England, Wales and Northern Ireland; the savings rates apply across the UK. Landlords with a mortgage get relief for finance costs at the new 24% property basic rate. Cash ISAs, the Personal Savings Allowance and the starting rate for savings are unchanged.
This guide is for landlords and savers who want to know what the Budget 2026 rise means for their tax bill and what they can do before April 2027. For the full list of Budget measures, see our Budget 2026 tax changes guide.
The new rates at a glance
| Band (taxable income) | 2026/27 rate | 2027/28 property and savings rate |
|---|---|---|
| Basic rate (first £37,700 above the personal allowance) | 20% | 24% |
| Higher rate (up to £125,140) | 40% | 44% |
| Additional rate (above £125,140) | 45% | 49% |
The personal allowance stays at £12,570 and the basic rate band at £37,700. Trustees pay 49% on property and savings income taxed at the trust rate. Rates on employment, pension and self-employed income are not changing. Dividend rates are not part of this measure.
Who is affected
- Individual landlords with UK rental profits, including furnished holiday lets now taxed as ordinary property income.
- Non-resident landlords with UK rental profits. See our guide to UK tax for non-residents.
- Savers whose interest goes over their Personal Savings Allowance and starting rate for savings.
- Trustees receiving rent or interest.
Landlords who own property through a limited company pay corporation tax rather than income tax on the profits, so the new property rates do not apply to the company. Dividends they take out are taxed at dividend rates.
HM Treasury's impact note estimates that about 5% of taxpayers will pay more because of the property rates (an average of £225 a year) and about 12% will pay more because of the savings rates (an average of £113 a year). Higher and additional rate taxpayers with large rental profits or savings balances will feel it most.
Landlords: what the rise costs
Illustrative examples (simplified, not advice). Each landlord is entitled to the full personal allowance and pays tax at the England, Wales and Northern Ireland rates.
| Landlord | 2026/27 tax | 2027/28 tax | Increase |
|---|---|---|---|
| Only income: £20,000 rental profit (£7,430 taxable) | £1,486 | £1,783.20 | £297.20 |
| Only income: £60,000 rental profit (£37,700 basic + £9,730 higher) | £11,432 | £13,329.20 | £1,897.20 |
| Salary £50,270 + £20,000 rental profit, £8,000 mortgage interest | £6,400 | £6,880 | £480 |
Mortgage interest relief
Landlords cannot deduct residential mortgage interest from rental profits. Instead they get a tax credit at the basic rate. From 6 April 2027 that credit follows the new property basic rate of 24%. Basic rate landlords are no worse off on their finance costs. Higher and additional rate landlords still lose relief: their rent is taxed at 44% or 49% but the credit is only 24%.
Scotland and Wales
The Scottish and Welsh Governments can set their own property income rates for their taxpayers. Check their announcements before budgeting. Savings rates are UK-wide.
Savers: what the rise costs
Most savers will pay nothing extra. The Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers) and the £5,000 starting rate for savings both stay. The Budget documents say a basic rate taxpayer would need more than £25,000 in savings outside ISAs before paying any tax on interest, or up to £150,000 if they also get the starting rate.
| Saver | 2026/27 tax on interest | 2027/28 tax on interest |
|---|---|---|
| Basic rate: salary £40,000, interest £3,000 (£1,000 tax-free) | £400 (20% of £2,000) | £480 (24% of £2,000) |
| Higher rate: salary £70,000, interest £5,000 (£500 tax-free) | £1,800 (40% of £4,500) | £1,980 (44% of £4,500) |
What you can do before April 2027
- Use your ISA allowance. The annual ISA limit stays at £20,000, including the cash ISA allowance. Interest inside an ISA is tax-free.
- Share savings and property with a spouse or civil partner who pays a lower rate. Transfers between spouses are generally free of capital gains tax. Jointly owned rental property is normally split 50:50 unless you make a Form 17 declaration that matches actual beneficial ownership.
- Time deductible spending. Repairs and other allowable costs save tax at your marginal rate. Costs incurred from 6 April 2027 save more for the same spend, but only if the timing is genuine.
- Review pension contributions. Personal contributions extend the basic rate band, which can bring rental or savings income back below the higher rate threshold.
- Think carefully about incorporation. A company pays corporation tax rather than the new property rates. But moving existing properties into a company can trigger capital gains tax and stamp duty land tax, and mortgage costs often rise. Get advice before doing it.
Frequently asked questions
When do the new landlord tax rates start?
6 April 2027, the start of the 2027/28 tax year. Rental profits for 2026/27 are taxed at 20%, 40% and 45% as now.
Do the new rates apply to non-resident landlords?
Yes. UK rental profits of non-resident individuals are taxed at the same 24%, 44% and 49% rates.
Does the rise affect landlords who own property through a company?
Not directly. Companies pay corporation tax on rental profits. The new rates apply to individuals and trustees.
Is interest in a cash ISA affected?
No. ISA interest stays tax-free, and the £20,000 ISA allowance is unchanged.
What happens to mortgage interest relief?
It stays a basic rate tax credit, rising from 20% to 24% from 6 April 2027 in line with the new property basic rate. Higher and additional rate landlords still get relief at only the basic rate.
Official sources
- Budget 2026 (Red Book), HM Treasury
- Budget 2026: Overview of tax legislation and rates (OOTLAR), HMRC
- OOTLAR Annex A: rates and allowances
- Income Tax: changes to tax rates for property and savings income (tax information and impact note)
- Finance Act 2026
This article is general information based on the Budget 2026 documents published on 28 October 2026 and is not personal tax advice. Legislation may change before it takes effect. Figures are rounded and the examples are simplified.
