What taxes do landlords have to pay in the UK? | 2026/27 Guide

When advising property investors on what taxes do landlords have to pay in the UK, practitioners must navigate a complex framework of taxes spanning the acquisition, holding, and disposal phases of a property business.

For the 2026/27 tax year, the landscape incorporates several major compliance changes, including the mandation of Making Tax Digital (MTD) for high-earning landlords, the abolition of the Furnished Holiday Lettings (FHL) regime, and the increased 5% Stamp Duty Land Tax (SDLT) surcharge.

Income Tax on Rental Profits

Landlords must pay income tax on the profits generated by their UK property business. Under section 268 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005), income tax is charged on the profits of a property business, and the person liable is the person receiving or entitled to those profits.

For the 2026/27 tax year, you apply the standard main rates of income tax to these profits:

• Basic Rate: 20%
• Higher Rate: 40%
• Additional Rate: 45%

Before applying these rates, landlords deduct their personal allowance, which remains frozen at £12,570 for the 2026/27 tax year.  The basic rate band applies to the next £37,700 of income, creating a higher rate threshold of £50,270.

The £1,000 Property Allowance: Under section 783AD of ITTOIA 2005, an individual receives a trading and property allowance of £1,000 per tax year.  If a landlord’s gross property income is below £1,000, it is entirely tax-free and does not need to be declared. If the income exceeds £1,000, the landlord can choose to deduct this £1,000 allowance from their gross income instead of deducting actual expenses.

Mortgage Interest Relief Restriction (Section 24)

Individual landlords cannot deduct their mortgage interest payments as a direct expense against their rental income.

Instead, under the “Section 24” finance cost restriction rules, landlords receive a basic rate tax credit (20%) against their final income tax bill for their allowable finance costs.  This mechanism means that the gross rental income (before mortgage interest) pushes the landlord’s total income higher, potentially crossing the £50,270 higher rate threshold. Corporate landlords are exempt from this restriction and can continue to deduct interest as a standard business expense.

The Abolition of the FHL Regime

Historically, landlords letting properties as short-term holiday rentals qualified for the advantageous Furnished Holiday Lettings (FHL) tax regime. The government completely abolished the FHL regime with effect from 6 April 2025.

Consequently, for the 2026/27 tax year, landlords must treat income from holiday homes identically to standard residential property income. This means short-term let landlords are now fully subject to the Section 24 mortgage interest restrictions and can no longer claim Business Asset Disposal Relief (BADR) upon selling the property.

Stamp Duty Land Tax (SDLT) Surcharge

When a landlord purchases an additional residential property (such as a buy-to-let) in England or Northern Ireland, they must pay higher rates of SDLT.

The Finance Act 2025 permanently increased this surcharge to 5% above the standard rates.  From 1 April 2025 (and carrying through the 2026/27 tax year), section 51 of the Finance Act 2025 dictates the following SDLT bands for additional dwellings:

• Up to £125,000: 5%
• £125,001 to £250,000: 7%
• £250,001 to £925,000: 10%
• £925,001 to £1,500,000: 15%
• Above £1,500,000: 17%

In Schedule 4ZA to FA 2003 (higher rates of stamp duty land tax for additional dwellings etc)… So much as does not exceed £125,000: 5%”

If a corporate landlord (a company) purchases a dwelling for more than £500,000, a flat SDLT rate of 17% applies to the entire transaction.

Capital Gains Tax (CGT) on Property Sales

When a landlord sells a rental property, they must pay Capital Gains Tax on the profit.

Before calculating the tax, the landlord can deduct the Annual Exempt Amount (AEA), which is capped at £3,000 for the 2026/27 tax year. The remaining gain is then taxed at the residential property CGT rates:

• Basic Rate Taxpayers: 18% on gains falling within the unused basic rate income tax band.
• Higher/Additional Rate Taxpayers: 24% on any remaining gains.

Landlords must report and pay this CGT liability via a ‘CGT on UK Property Account’ within 60 days of the property sale completing.

Making Tax Digital (MTD) for Income Tax

The 2026/27 tax year marks the introduction of mandatory digital reporting for landlords.

From 6 April 2026, MTD for Income Tax becomes legally mandatory for landlords with qualifying property and trading income exceeding £50,000.  If a landlord meets this threshold, they must maintain digital records using compatible software and submit quarterly updates to HMRC, replacing the traditional annual Self Assessment process.

The government plans to reduce this mandation threshold to £30,000 from April 2027, and subsequently to £20,000 from April 2028.

National Insurance Contributions (NICs)

Following the abolition of mandatory Class 2 National Insurance contributions in April 2024, most landlords do not pay NICs on their rental income. Rental income is treated as investment income rather than trading income. A landlord will only pay NICs if their property activities are so extensive that they amount to a full trade (for instance, running a hotel or a substantial property development business).

Summary of Landlord Taxes (2026/27)

Next steps for research: Verify if the landlord operates as a non-resident, as they will be subject to the Non-Resident Landlord Scheme (NRLS) requiring letting agents or tenants to withhold basic rate tax at source under section 971 of ITA 2007.