Are landlords facing higher taxes?

This guide explains the full tax environment for landlords, what is already in place, and what future changes could mean for your finances. 

What taxes do landlords pay in the UK? 

UK landlords pay tax on rental income through their self-assessment tax return or, from 2026/27 tax year onwards, through Making Tax Digital (MTD) for income tax. Landlords may also face: 

• Stamp or land taxes when buying property – these duties differ by UK nation  
• Capital Gains Tax (CGT) when selling property 
• Inheritance Tax on property portfolios – business relief (or BPR) is not available for inherited property portfolios  
• Potential interaction with VAT in some property scenarios 

How rental income is taxed 

Rental income is added to your total annual income and taxed at your marginal income tax rate.  

Reliefs and deductions 

Allowable expenses and reliefs are deducted from rental income before it is taxed. These include maintenance and repair costs and letting and professional fees. See our guide to landlord tax and expenses for more information. 

You can’t claim your mortgage interest as a deduction. Instead, you can claim a 20% tax reducer against the interest. If you are a basic rate taxpayer this will work out as the same relief but if you are: 

• a higher or additional rate taxpayer in England, Wales or Northern Ireland, or 
• an intermediate, higher, advance or top rate taxpayer in Scotland then this does not fully relieve your finance costs.  

NICs for landlords? 

Rental income is generally considered to be investment income rather than self-employment income. As such landlords are not considered: 

• to be ‘gainfully employed’ for self-employment NICs purposes, and  
• do not have ‘relevant profits’ from a trade so are not required to pay self-employment NICs unless they meet the ‘Tier 3’ criteria in HMRC’s guidance. 

Which landlords fall within Tier 3? 

HMRC’s manuals state that you fall into Tier 3 if you have a specific trade with which you run your property portfolio. It needs to meet both the gainful employment and trade, profession or vocation tests.  

Are NICs being introduced for all landlords? 

Recently there has been discourse and debate around introducing NICs to property income more widely from thinktanks. It is unclear whether the Government is going to adopt this policy until it publishes its Budget on 28th October 2026. 

The advantages of this policy could include: 

• perceived fairness to the non-landlord population in aligning property income with earned income 
• simplification of self-employment and property income for taxpayers 
• ensuring more landlords have a NICs record which provides them a full state pension 

While the disadvantages would include: 

• a further financial burden for landlords as property income also has a 2% rate rise in 2027/28 (England, Northern Ireland and Wales) 
• in addition to increased regulatory burden for landlords (see below) 

Recent and ongoing tax changes affecting landlords 

From the 2027/28 tax year, property income will be taxed at a higher rate than the standard UK income tax rate in England, Wales and Northern Ireland. Scotland does not yet have the power to change property income tax rates but expects to gain this power shortly. 

The tax reducer will increase to 22% for the 2027/28 tax year in line with the basic rate of property income tax.  

This rate increase adds to the reduction of tax advantages and increase in admin burden for landlords over recent years in the UK. See our article here for a list of recent tax and regulatory changes for landlords.  

The bigger picture – is the tax environment getting tougher? 

Yes, the tax environment has become more challenging for landlords in the UK from both a perception and policy perspective. This includes: 

• Increasing tax complexity – for instance, CGT rules on property sales are complicated and differ for those with two or more properties, non-UK landlords, depend on elections for Private Property Relief (PPR) and your marginal tax band 
• Reduced tax efficiency compared to the past – for example mortgage interest could be fully relieved until 5th April 2020 and the Furnished Holiday Lets scheme gave tax advantages for holiday landlords until 5th April 2025 
• Greater scrutiny from HMRC – the Let Property Campaign and the introduction of MTD for income tax for the first landlords from 6th April 2026 give HMRC access to more data than ever on landlords’ financial affairs 

Data shows HMRC received £104 million in additional tax revenue in 2025/26 from the Let Property campaign and other property-related compliance activity.  

How landlords can reduce their tax liability 

There are steps you can consider in order to reduce your tax burden as a landlord. 

Claim all allowable expenses 

Ensure you’re claiming every expense, allowance and relief available to you. See our guide here. 

Look at your ownership structure  

In certain circumstances, it may be more tax efficient to hold your properties through a limited company. We look at this option here.  

Plan for CGT before selling 

Take professional advice before selling a property to ensure you understand the future CGT bill you may face and take any steps required to make this more efficient.  

Key deadlines and compliance risks 

Reduce your risk of penalties and interest charges from HMRC by ensuring you are on top of all the deadlines and rules you face. For the key tax and reporting deadlines for 2026, see our guide. 

• Self-Assessment tax returns – register by 5th October, file by 31st January and pay your tax by the same date. For more detail, see our Q&A. 
• MTD for income tax – quarterly updates due by 7th August, November, February and May each year and your end of year tax return filed and tax paid by 31st January for those within the scheme 
• Record-keeping expectations – ensure you have accurate record keeping to avoid errors and can provide records at HMRC’s request. If you haven’t already switched to a digital bookkeeping solution, now is the time to do so. TaxAssist Accountants partner with QuickBooks, Xero, Dext and landlord specialists, Hammock, and can help you choose what is right for you.  

How TaxAssist Accountants Can Help 

TaxAssist Accountants has a wealth of experience helping landlords and we can help you with:  

• Choosing bookkeeping software, including training on how to use it  
• Filing your self-assessment tax return 
• Advice on when you must start MTD for income tax, and pulling together and filing quarterly updates and end of year tax return 
• Ensuring you are claiming all the tax reliefs you are entitled to  
• Reviewing your landlord business structure for tax efficiency  

Our summary of the Budget 2026 will be published here – bookmark now to read it shortly after the Government announcements are made. 

For more information see our landlords page.  

Last updated 2 Sep 2026 | First published 2 Sep 2026

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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