Landlord Tax Changes in 2026
A practical guide to Making Tax Digital, higher dividend tax, the new property income rates, furnished holiday lets, purchase taxes and Capital Gains Tax.
What is already live, what arrives next, and what UK property owners should review before buying, holding or selling.
Last updated: 27 July 2026
Scope: UK Income Tax and Capital Gains Tax, with devolved purchase-tax cautions
Landlord tax is not changing in one neat package. Different rules affect record-keeping, rental profits, company dividends, holiday lets, purchases and disposals - and they begin on different dates.
This guide explains the position as at 27 July 2026, separates rules that are already live from those still ahead, and highlights the decisions that deserve a fresh calculation. It is written for education, not to tell you which ownership structure or tax election to choose.
Scope note: Income Tax and Capital Gains Tax are considered on a UK basis, with important devolved-tax cautions. The worked Stamp Duty Land Tax examples apply to England and Northern Ireland. Scotland and Wales use different property-purchase taxes.
The six changes to know
- Making Tax Digital is live for the first group. Individual landlords and sole traders with qualifying gross income above £50,000 must use MTD for Income Tax from 6 April 2026. For most affected taxpayers, the first quarterly update is due by 7 August 2026. [1][2][3]
- Dividend tax increased on 6 April 2026. The ordinary rate is 10.75% and the upper rate is 35.75%; the additional rate remains 39.35%. The dividend allowance remains £500. This matters to landlords who extract profits from a property company. [4][6]
- Separate property income tax rates begin on 6 April 2027. The published rates are 22%, 42% and 47%, with residential finance-cost relief moving to 22%. The change is enacted in Finance Act 2026. [4][5]
- The furnished holiday lettings regime has gone. Since April 2025, former FHL income and gains have broadly been brought into the ordinary property-business rules. [7][8]
- Buying costs are higher. In England and Northern Ireland, the additional-property surcharge is 5 percentage points above standard SDLT rates, while Multiple Dwellings Relief was abolished for most transactions from 1 June 2024. [9][10]
- Disposal deadlines remain tight. Individuals generally pay CGT at 18% or 24%, after available reliefs and the £3,000 annual exempt amount for 2026/27. UK residential property CGT normally has to be reported and paid within 60 days of completion. [11][12]
Landlord tax timeline
Key implementation dates | UK focus | Updated July 2026
Multiple Dwellings Relief abolished for most SDLT transactions.
England and Northern Ireland additional-property SDLT surcharge rises from 3% to 5%.
Furnished holiday lettings regime ends for Corporation Tax, then Income Tax and CGT.
MTD begins above £50,000 gross qualifying income; dividend ordinary and upper rates rise.
First MTD quarterly update deadline for most taxpayers in the initial mandatory group.
Property income rates become 22% / 42% / 47%; MTD threshold falls to more than £30,000.
MTD threshold falls to more than £20,000 of gross qualifying income.
Educational only—verify current rules and any transitional provisions before acting.
1. Making Tax Digital: the immediate 2026 priority
MTD for Income Tax is now mandatory for an individual who is registered for Self Assessment, receives property or self-employment income, and has qualifying income above the relevant threshold. HMRC defines qualifying income as gross income before expenses - effectively turnover - from property and self-employment combined. Employment pay, pensions and dividends are not included in this MTD threshold calculation. [1][2]
| Income checked by HMRC | Qualifying income threshold | MTD start date |
|---|---|---|
| 2024/25 tax return | More than £50,000 | 6 April 2026 |
| 2025/26 tax return | More than £30,000 | 6 April 2027 |
| 2026/27 tax return | More than £20,000 | 6 April 2028 |
Affected landlords must keep digital records, use compatible software and send quarterly summaries of income and expenses. A quarterly update is not a replacement for the annual tax return, and the tax-payment deadline remains unchanged. [1][3]
Urgent deadline
For most people in the first mandatory group, the first update covers 6 April to 5 July 2026 and must reach HMRC by 7 August 2026. HMRC says it will not issue penalty points for late quarterly updates during the first MTD tax year, 2026/27. That concession does not remove penalties for a late Self Assessment return or late tax payment. [3]
What to do now
- Check the gross property and self-employment income shown on the relevant return; do not use profit after expenses.
- Confirm that every property-income source is connected to compatible software.
- Reconcile bank transactions before each quarterly deadline instead of rebuilding the year in January.
- If you believe an exemption may apply, use HMRC’s exemption process rather than simply not filing. [1]
2. Dividend tax: a 2026 increase for company owners
From 6 April 2026, dividends above the available £500 allowance are taxed at 10.75% in the ordinary band, 35.75% in the upper band and 39.35% in the additional band. The first two rates are 2 percentage points higher than in 2025/26. [4][6]
That does not alter the tax charged inside the company. For 2026, Corporation Tax remains 19% for companies with profits up to £50,000, 25% above £250,000, with marginal relief between the thresholds. The thresholds can be reduced where there are associated companies. [13]
Simple illustration: Assume a director-shareholder receives a £20,000 dividend, has the full £500 dividend allowance available, and the entire taxable balance remains in either the ordinary or upper dividend band. A 2 percentage-point rate increase adds £390 of personal tax: £19,500 x 2%. This ignores salary, other dividends, the Personal Allowance, Corporation Tax and band interactions.
The lesson is not that a company is automatically wrong. It is that a credible comparison must model both layers: tax on company profits and tax when value is extracted personally.
3. New property income tax rates from April 2027
Finance Act 2026 creates separate Income Tax rates for property income. From 6 April 2027 the published property basic, higher and additional rates are 22%, 42% and 47%. Property income will sit after employment, trading and other non-property income in the tax calculation, but before savings and dividends. [4][5]
| Property income item | 2026/27 position | From 6 April 2027 |
|---|---|---|
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
| Residential finance-cost tax reduction | 20% | 22% |
| Property allowance | £1,000 | Unchanged |
| Rent a Room Scheme | Existing rules | Unchanged |
Carried-forward property losses will still have to be set against property income. The change does not turn every landlord into a 22% taxpayer: rate bands, other income, allowances and the ordering rules still matter. [4]
Worked example - individual landlord: Assume £20,000 of property profit before residential finance-cost relief, £8,000 of eligible finance costs, sufficient adjusted income and tax liability to use the full reducer, and all of the profit falling in the higher-rate band. In 2026/27 the simplified result is £20,000 x 40% less £8,000 x 20% = £6,400. From 2027/28 it becomes £20,000 x 42% less £8,000 x 22% = £6,640. The increase is £240. Real calculations can differ because the finance-cost reducer is capped and rate bands may be shared with other income. [4]
Devolved-rate caution
Finance Act 2026 contains provisions for Scottish and Welsh property rates. Property owners resident in Scotland or Wales should check the final rate resolution for the relevant tax year rather than automatically using an England and Northern Ireland projection. [5]
4. Furnished holiday lettings: the old advantages have ended
The separate FHL regime ceased from 1 April 2025 for Corporation Tax and from 6 April 2025 for Income Tax and CGT. Former FHL income and gains now form part of the person’s ordinary UK or overseas property business. [7]
For individual owners, the practical effects include:
- finance and mortgage-interest relief falling within the residential finance-cost restriction;
- no capital allowances on new expenditure for fixtures, furniture or furnishings, with replacement of domestic items relief potentially available instead;
- withdrawal of trading-business CGT reliefs that were available under the FHL regime; and
- FHL income no longer counting as relevant UK earnings for maximum pension-relief purposes. [7][8]
There is a transitional protection for qualifying expenditure already in a capital-allowances pool by 5 April 2025: writing-down allowances, balancing allowances and charges can continue until the pool is used up or a small-pool claim is made. New expenditure follows the post-repeal property-business rules. [8]
Owners of former FHLs should therefore revisit post-tax cash flow, historic capital-allowance pools, pension assumptions and the tax treatment of a future sale. A commercial decision to keep, convert or sell should be based on current rules, not an old holiday-let spreadsheet.
5. Buying property: acquisition tax must be in the deal appraisal
For an additional residential property in England or Northern Ireland, current higher SDLT rates are 5% on the first £125,000, 7% from £125,001 to £250,000, 10% from £250,001 to £925,000, 15% from £925,001 to £1.5 million and 17% above £1.5 million. [9]
Purchase example: An additional property bought for £250,000 creates SDLT of £15,000: £125,000 x 5% plus £125,000 x 7%. That is cash required at completion before legal fees, finance costs, surveys, refurbishment or contingency. [9]
Multiple Dwellings Relief, which allowed SDLT on qualifying bulk purchases to be calculated using average dwelling values, was abolished for most transactions completing or substantially performed on or after 1 June 2024. Narrow transitional rules apply to some earlier contracts. [10]
Scotland and Wales are different
Scotland uses Land and Buildings Transaction Tax; its Additional Dwelling Supplement is 8% of the purchase price for transactions on or after 5 December 2024, subject to transitional rules. Wales uses Land Transaction Tax and increased its higher residential rates from 11 December 2024; the first £180,000 is charged at 5% under the higher-rate table. Use the relevant national calculator rather than an SDLT shortcut. [14][15]
6. Selling property: rates are only half the issue
For individuals in 2026/27, gains within the available basic-rate band are generally charged at 18% and gains above it at 24%. The annual exempt amount is £3,000. Allowable acquisition and disposal costs, qualifying capital improvements, losses and reliefs can change the taxable gain. [11]
Where CGT is due on a UK residential property sale, it normally has to be reported and paid within 60 days of completion. A landlord who is already in Self Assessment must also include the disposal on the relevant annual return. [12]
The 60-day clock means the tax calculation should begin before exchange, not after the sale proceeds have been committed elsewhere.
7. Individual or limited company? Recalculate - do not guess
The 2027 property-rate increase may make incorporation look more attractive at first glance, but a single headline rate cannot answer the question.
An individual may face property Income Tax and restricted finance-cost relief. A company pays Corporation Tax on profits and chargeable gains, while the owner may then pay salary, dividend or other extraction taxes. Existing properties can also create transaction, refinancing and legal consequences if transferred. [4][6][13]
A proper comparison should cover:
- expected rent, voids, repairs and interest over several years;
- how much cash will stay invested and how much must be taken personally;
- tax on acquisition, annual profit, refinancing and eventual sale;
- administration and accountancy costs;
- succession and joint-ownership plans; and
- the cost and tax consequences of moving an existing property.
The sensible output is a like-for-like forecast under stated assumptions - not a rule that one structure is always best.
8. A practical landlord tax checklist
Do now
- Identify whether MTD already applies and, if so, confirm the 7 August 2026 update is ready.
- Record gross qualifying income separately from accounting profit.
- Update dividend forecasts for the 2026/27 rates.
- Ring-fence cash for tax rather than treating gross rent as spendable income.
Before 6 April 2027
- Re-run each personally owned property’s cash flow at 22%, 42% and 47% as relevant.
- Increase the finance-cost reducer to 22% in the same model; do not deduct interest twice.
- Check whether 2025/26 qualifying income brings you into MTD from April 2027.
- Review former FHL assumptions and any remaining capital-allowance pool.
Before any purchase or sale
- Use the correct national acquisition-tax calculator and current surcharge.
- Treat SDLT, LBTT or LTT as part of the cash-in requirement and return calculation.
- Model CGT before exchange and prepare for the 60-day reporting deadline.
- Ask a regulated tax adviser to check unusual ownership, trust, partnership, non-resident or incorporation issues.
Frequently asked questions
Does every landlord need Making Tax Digital now?
No. The first mandatory group is based on gross qualifying property and self-employment income above £50,000. The threshold falls to more than £30,000 from April 2027 and more than £20,000 from April 2028. Exemptions can apply, including for digital exclusion, but they must be dealt with through HMRC. [1][2]
Does the 22% property rate mean all rent is taxed at 22%?
No. It is the new basic rate for property income from April 2027. Property income can fall into the 22%, 42% or 47% bands depending on the person’s wider tax calculation. [4]
Will mortgage interest become fully deductible in 2027?
Not for an individual residential landlord merely because the rate changes. The finance-cost restriction remains, but the tax-reduction percentage moves from 20% to the 22% property basic rate. [4]
Is a limited company now automatically cheaper?
No. Companies and their owners can face Corporation Tax, dividend or salary tax, administration costs and tax on future gains or extraction. The comparison depends on the whole lifecycle and the amount of profit retained. [6][13]
Are landlord purchase taxes the same throughout the UK?
No. SDLT applies in England and Northern Ireland, LBTT in Scotland and LTT in Wales. Each has its own rates, supplements and reliefs. [9][14][15]
Brick & Balance view
The direction of travel is clear: more digital reporting, higher tax on personally received property income from 2027, and less favourable treatment for several specialist or leveraged strategies.
That does not make property uninvestable. It makes conservative underwriting more important. Build the tax into the deal before you buy, model more than one ownership route, preserve a cash buffer, and update the numbers whenever the rules change.
Important disclaimer
This article is for general education only. It is not personal tax, legal, accounting, mortgage or investment advice. Tax treatment depends on individual circumstances and can change. Examples are simplified and exclude several interactions. Before acting, check current official guidance and take advice from a suitably qualified UK tax adviser or accountant.
References
- HMRC: Find out if and when you need to use Making Tax Digital for Income Tax
- HMRC: Work out your qualifying income for Making Tax Digital for Income Tax
- HMRC: Deadline approaches for first Making Tax Digital quarterly update
- HM Treasury/HMRC: Change to tax rates for property, savings and dividend income - technical note
- Finance Act 2026
- HMRC: Tax on dividends
- HMRC: Abolition of the furnished holiday lettings tax regime
- HMRC: Clarification on abolition of the furnished holiday lettings tax regime
- HMRC: Stamp Duty Land Tax - residential property rates
- HMRC: Stamp Duty Land Tax - abolition of Multiple Dwellings Relief
- HMRC: Capital Gains Tax rates
- HMRC: Report and pay Capital Gains Tax after selling UK property
- HMRC: Corporation Tax rates and allowances
- Revenue Scotland: Additional Dwelling Supplement
- Welsh Government: Land Transaction Tax rates and bands
Version 1.0 | Last updated: July 2026 | Resource code: BB-004