Autumn Budget 2026: higher tax on property income

The Autumn Budget 2026 announces a further two-percentage-point increase in the basic, higher and additional income tax rates on property income from 6 April 2027, taking them to 24%, 44% and 49% in England, Wales and Northern Ireland, as Budget paragraph 6.246 sets out. The government plans to legislate for the new rates in Finance Bill 2026–27. The property rate increase does not apply to Scottish taxpayers. Because finance-cost relief follows the property basic rate, residential landlords' relief rises too.

Key figures:

• A landlord in England with £10,000 of property profit and £4,000 of fully usable mortgage interest pays £120 more income tax.
• A mortgage-free landlord in England with the same profit pays £200 more.
• A landlord who lives in Scotland, with £4,000 of fully usable finance costs, pays £80 less income tax. The property income tax rate rise does not apply to Scottish taxpayers, but their finance-cost reduction still rises with the property basic rate.
• PolicyEngine estimates £399 million of additional net government revenue and a £14 reduction in average household net income in 2027–28.
• The government's costing, certified by the OBR, has £394 million to £412 million a year of extra income tax from 2029–30 to 2031–32, £539 million in 2028–29 and none in 2027–28. Its total in the Budget's Table 6.1, which adds the costing's other lines, is £35 million in 2027–28, £575 million in 2028–29 and £435 million to £455 million a year from 2029–30.

The 2027–28 and 2028–29 figures use different collection-timing bases and are not directly comparable. From 2029–30, PolicyEngine's estimate exceeds the costing's income tax line by 9% to 11%; see the budgetary impact section.

Our Autumn Budget 2026 dashboard is where we publish estimates for the Budget measures we model. A separate explainer covers the trading allowance increase. The Budget also raises savings income tax rates; we will cover that measure separately.

The Budget 2025 technical note had already set property rates at 22%, 42% and 47% from April 2027. We measure the additional two-point increase against those existing 2027 rules.

Income tax band	Already scheduled for 2027–28	Budget 2026 rate	Change
Basic	22%	24%	+2 percentage points
Higher	42%	44%	+2 percentage points
Additional	47%	49%	+2 percentage points

From April 2027, employment, pension and trading income fill the tax bands before property income. Property income comes before savings and dividends. Allowances first reduce income other than property, savings or dividends. A landlord's other income therefore affects the rate charged on rental profits.

The examples below isolate the announced property measure in 2027–28. They hold the stated income and expenses fixed and show income tax rather than household income after means-tested benefits.

For individual residential landlords, mortgage interest normally produces a tax reduction rather than a deduction from rental profits. Finance costs, property profits, adjusted total income and the tax liability limit the reduction. HMRC's explanation of residential finance-cost relief describes these limits.

From April 2027 the relief follows the property basic rate, as the Treasury policy costings confirm. This Budget therefore raises it from the already scheduled 22% to 24%. That offsets part of the tax increase for landlords with eligible finance costs.

Consider two adults in England, each with £12,000 of rent, £2,000 of allowable non-finance expenses and £4,000 of qualifying mortgage interest. Deducting actual non-finance expenses leaves £10,000 of property profit. Both can use the full finance-cost reduction.

Calculation, 2027–28	£30,000 salary: before	£30,000 salary: after	£60,000 salary: before	£60,000 salary: after
Property profit	£10,000	£10,000	£10,000	£10,000
Rate on that profit	22%	24%	42%	44%
Tax before finance-cost relief	£2,200	£2,400	£4,200	£4,400
Finance-cost reduction	£880	£960	£880	£960
Tax attributable to property	£1,320	£1,440	£3,320	£3,440
Extra annual income tax	—	£120	—	£120

Both pay £200 more before relief, while their finance-cost reduction rises by £4,000 × 2% = £80. Their net increase is £200 − £80 = £120. A mortgage-free landlord with the same profit pays £200 more. Both tax bands rise by two points, explaining the identical increases despite different starting liabilities.

The property rate increase excludes Scottish taxpayers, whose rental income falls under Scottish Income Tax rules. Finance-cost relief is a separate calculation. The Finance Act 2026 amendment ties it to the UK property basic rate without a Scottish exception. Applying that rule, a Scottish taxpayer who lets property and can use the full reduction on £4,000 of eligible finance costs receives £80 more relief, reducing their income tax by £80 if nothing else changes. A mortgage-free Scottish taxpayer has no change from this measure.

A landlord in England with a £30,000 salary has already used the Personal Allowance against salary. If they also have £6,000 of taxable property profit after deductions and no eligible finance costs, they pay £120 more income tax in 2027–28: £6,000 × 2% = £120. This property-only calculation holds their income fixed and changes no other Budget measure.

We model the property measure alone on a representative sample of UK households. The property-only microsimulation results use the certified Microcosm UK dataset and the OBR's October 2026 forecast. They are static estimates, with no behavioural response.

PolicyEngine estimates that the measure raises £399 million of net government revenue in 2027–28, rising to £459 million in 2031–32. We compare it with the income tax line of the government's costing, certified by the OBR, in the OBR's detailed policy table (Table 1.1, measure 61). We use that line as the closest comparison; PolicyEngine's estimate also includes interactions with other taxes and benefits. The costing's other non-zero lines carry the labels “Onshore CT”, “Scottish BGA (current)” and “Scottish self-financed expenditure”. The Budget's Table 6.1, row 61 gives the total of all the lines, rounded to the nearest £5 million and on a National Accounts basis; we show it for context.

Year	PolicyEngine net government revenue, £ million	OBR income tax line, £ million	PolicyEngine against the OBR line	Table 6.1 total, £ million
2026–27	0	0	Before implementation	0
2027–28	399	0	Not comparable	35
2028–29	412	539	Not comparable	575
2029–30	429	394	9% higher	435
2030–31	446	403	10% higher	445
2031–32	459	412	11% higher	455

Positive values are additional revenue. PolicyEngine measures the change in government taxes less spending, including benefit interactions. In 2029–30, its £429 million estimate exceeds the OBR's £394 million income tax line by £35 million, or about 9%. Percentages use unrounded figures.

The first two years, 2027–28 and 2028–29, are not comparable without a collection-timing adjustment. PolicyEngine scores each tax year's liabilities in that year. Self Assessment payments on account normally rest on the previous year's tax bill; the balancing payment for 2027–28 is due on 31 January 2029, alongside the first payment on account for 2028–29. HMRC's payment guidance explains that schedule.

The ONS public-finance methodology, section 6.1.2 records Self Assessment income tax using cash receipts, without shifting them back to the year the income arose. This can produce a small first-year receipts effect followed by a catch-up. Comparing those first two years with same-year model liabilities requires a collection-timing adjustment; it does not by itself establish a difference in the tax base.

The government's costing also allows for some landlords incorporating, as the policy costings set out. PolicyEngine holds that choice fixed. We have not yet explained the later-year gap; differences in data, behaviour and accounting could each contribute.

Across all households, average annual net income falls by £14 in 2027–28 and £15 in 2031–32. In 2027–28, the average reduction ranges from £1 in the lowest income decile to £58 in the highest; in 2031–32, those averages are £2 and £66.

Income deciles rank people by their household's baseline equivalised net income before housing costs. The analysis calculates rankings separately for each year. The changes below are averages per household in each group, including households whose income does not change.

Income decile	Average household net income change, 2027–28	Average household net income change, 2031–32
1 (lowest income)	−£1	−£2
2	−£5	−£6
3	−£5	−£6
4	−£5	−£5
5	−£4	−£7
6	−£7	−£3
7	−£9	−£14
8	−£17	−£19
9	−£25	−£27
10 (highest income)	−£58	−£66
All households	−£14	−£15

Average change in household net income by income decile

Property income tax measure, all households

• The worked examples are hypothetical single adults aged 35. We hold their income fixed at the stated 2027–28 amounts. They include no pension contributions, Gift Aid, student loans, property losses, carried-forward finance costs or other reliefs.
• The household tables show tax attributable to property income. The mortgage examples assume each landlord can use the full finance-cost reduction.
• The Scottish mortgage example applies the existing Finance Act rule linking relief to the UK property basic rate. The Finance Bill will set the final implementation of the new rates.
• National estimates hold households' behaviour fixed. They do not model landlords incorporating in response to the tax change.
• This post does not report poverty, inequality or people-affected estimates.
• Population estimates include changes in means-tested benefits. The worked household examples show income tax; a change in benefits can offset part of a household's extra tax.

The calculations use the policyengine Python package (version 6.11.1), PolicyEngine UK (version 2.151.0) and PolicyEngine core (version 3.33.3).

The household generator changes savings and property rates together against the already scheduled 2027–28 rules. The landlord examples in this article have no savings income, so the savings rate change has no effect on them: their tax differences isolate the property changes, including finance-cost relief. We checked the £6,000 property-only example separately. The baseline and reform household calculations both use the OBR’s October 2026 forecast update. Supplied 2027–28 income stays fixed; the forecast updates the model’s projected parameters. Independent arithmetic checks the tax calculations.

The population run uses the certified Microcosm UK 2024–25 dataset (a6299504) and the detailed October forecast at dashboard commit 4de166f0, applied to baseline and reform alike. It changes the property measure alone and includes the finance-cost-relief increase. Household net income and government revenue include interactions with the other taxes and benefits in the model. The decile averages are household-weighted means of unequivalised household net income changes; the income ranking uses person-weighted equivalised HBAI income before housing costs. We round monetary values only for presentation.

The shared analysis files record the household inputs, model versions, forecast settings and validation for the property, savings and trading explainers. The property population records retain the exact source outputs and provenance. We round monetary amounts in tables to whole pounds; the calculation records retain precision. The hypothetical household calculations do not require population microdata.