Budget 2026 for Landlords: Property Income Tax Rises, and Why Incorporation Deserves a Look

By the Commercial & Property Finance Team at Acorn.finance | Published 29 October 2026

Key points

From 6 April 2027, individual landlords pay property income tax at 24%, 44% and 49%.
Finance cost relief stays aligned with the property basic rate, now 24%.
Companies are not affected by the income tax rise.
Incorporation relief (section 162) may defer capital gains tax when a genuine property business moves into a company.
Model it with your accountant before you decide.

What has changed

Last year's Budget set property income tax rates at 22%, 42% and 47% from April 2027. This Budget adds a further two percentage points, taking the rates to 24%, 44% and 49%. Finance cost relief stays aligned with the property basic rate, so it rises to 24%. The rise applies to individuals and trusts, not to companies.

What it costs in practice

Example (simplified, higher-rate taxpayer): rental profit of £20,000 before mortgage interest, and £10,000 of mortgage interest.

2026/27: tax of £8,000 (40%) less a £2,000 credit (20% of the interest) = £6,000.
2027/28: tax of £8,800 (44%) less a £2,400 credit (24% of the interest) = £6,400.

So the rise is £400 on this example. It is real, but it is not the full 4 percentage points because the credit rises too. Higher borrowing and larger portfolios feel it more, because relief is still given below the rate you pay.

Reaction: Fleet Mortgages' Steve Cox expects many landlords, especially those with larger portfolios, to reconsider how they hold property. Blick Rothenberg's Heather Powell expects some landlords to sell, leaving tenants with fewer homes and pushing them towards corporate build-to-rent.

Why incorporation deserves a serious look

Inside a company, mortgage interest is deductible in full and profits are taxed at corporation tax rates of 19% to 25%, rather than at 24%, 44% or 49%. Rental income in a company is not touched by this Budget's income tax rise. Many lenders have built products for limited company landlords, and most new buy-to-let applications are now made through them.

If you hold property personally and pay higher-rate tax, we would encourage you to model the company route properly. It is not right for everyone, but the case for looking at it gets stronger each time the rates rise.

Incorporation relief (section 162). If you transfer a genuine property business to a company in exchange for shares, section 162 can defer the capital gains tax that would otherwise arise on the transfer. Points to know:

HMRC looks at whether your rental activity amounts to a business. A larger, actively managed portfolio is more likely to qualify. Do not assume.
Stamp Duty Land Tax can still arise on the transfer, including the higher-rates surcharge. Your accountant and solicitor can advise on structuring.
Mortgages usually need to be refinanced into the company, which can bring early repayment charges, valuations and legal costs.
Taking profits out of a company is taxed too. Dividend tax rates have been 10.75% and 35.75% since April 2026, and a new distributions framework is reported to start in April 2028.

Read our full guide: Limited Company vs Personal Name: The Definitive Buy-to-Let Guide. It includes the free Landlord's Incorporation Playbook PDF.

Other changes to watch

Making Tax Digital reaches smaller landlords. As currently legislated, the income threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

Search Acumen's Andrew Lloyd expects the extra tax to affect supply and rents over the next year, particularly for small and accidental landlords.

What to do now

Work out your 2027/28 tax position, personally and as a company.
Ask your accountant whether section 162 relief is realistic for your portfolio.
Speak to our buy-to-let desk about company mortgages and refinance timing.
Do not rush: poor timing can cost more than the tax saved.

FAQs

Does the rise apply to my limited company? No. It applies to individuals and trusts. Companies pay corporation tax.

Is mortgage interest still tax deductible for personal landlords? Not as an expense. You get a tax reduction at the property basic rate, which rises to 24% from April 2027.

Do I have to incorporate? No. It depends on your portfolio, borrowing, tax position and plans.

Sources

Budget 2026: What It Means for Pubs, Business Owners, Landlords, Homebuyers and DevelopersA steady Budget, not a game-changer: real gains, real costs and a lot of small print.Budget 2026 for Pubs: Rates Relief Rises to 35%, but Is It Enough?Pub rates relief in England rises from 15% to 35% from 1 April 2027.Budget 2026 for Business Owners: Capital Allowances, BADR and Founders' ReliefThe Business Asset Disposal Relief lifetime limit halves from £1 million to £500,000 for disposals on or after 6 April 2027.Budget 2026 for First-Time Buyers: Your First Home, the LISA Change and the New ISAYour First Home offers a government equity loan of up to 20% on new-build homes in England, from a 2.5% deposit.Budget 2026 for Property Developers: Funding, Viability and Where the Opportunities AreAn extra £1.5 billion for social and affordable housing, reported as delivering about 10,000 homes.

Discuss your plans

Speak to an Acorn.finance broker about how the Budget affects your finance plans.

0207 959 3882

This article is general information based on the Budget document and published reporting as at 29 October 2026. Details may change as legislation is published. Acorn.finance does not provide tax or legal advice. Take advice from a qualified accountant or solicitor before acting. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. Finance is subject to status and lender criteria.