If you hold rental property in your own name, you’ve been feeling the pain for years — and the latest Budget has added more. Following the October 2026 Budget, property income is set to be taxed at rates 4% higher than before. In this article, we’ll work through what that means, using a worked landlord example, and set out the options available.
Section 24: The Mortgage Interest Restriction
The pain started in 2016, when George Osborne introduced a restriction on how much mortgage interest landlords can offset against rental income. It’s commonly known as Section 24, or simply the “tax on interest.” It was fully in place by 2020 and led many landlords to change how they hold their properties. The concern is that the new rate rises, combined with Section 24, could prove to be the death of property ownership in your own name going forward.
New Property Income Tax Rates from April 2027
The previous Chancellor, Rachel Reeves, had announced a 2% rise in property income tax rates from April 2027. That wasn’t enough for John Healey, who has taken it to +4% in total. The resulting rates for property income in your own name are:
| Tax Band | Property Income Rate from April 2027 |
|---|---|
| Basic rate | 24% |
| Higher rate | 44% |
| Additional rate | 49% |
The 64% Tax Trap Over £100,000
There’s a further sting for higher earners. Once income goes over £100,000, you begin to lose your personal allowance, which creates a band where the effective rate is higher still. In the video, Zee even explains how that rate could hit 64%, rather than the 49% headline maximum rate.
Landlord Example: £100,000 Rental Income
To show the real impact, let’s works through an example of a landlord who has done well:
| Item | Amount |
|---|---|
| Gross rental income | £100,000 |
| Direct costs, including letting fees | (£30,000) |
| Profit before mortgage interest | £70,000 |
| Mortgage interest | £20,000 |
| Tax reducer on the mortgage interest — now (20%) | £4,000 |
| Tax reducer — after April 2027, if it rises to match the 24% rate | £4,800 |
Note that the increase in the tax reducer to 24% is an assumption, and that if it does happen, it could prove to be another sneaky tax rise. In this example, £19,730 of the profit falls into the higher rate band (£70,000 less the £50,270 higher rate threshold).
Section 24 Impact: £3,946 More Tax
Before Section 24, the £20,000 mortgage interest would have come off the profit, leaving £50,000 to be taxed. Under Section 24, the landlord is taxed on the full £70,000 profit and only receives tax relief on the interest at the basic rate of 20%. In this example, that means they pay £3,946 more in tax than they would have under the old rules — and that’s the position today, before the new rate rises.
April 2027 Rise: £1,497 More Tax
Now add the new rates. On the same example, the tax bill moves as follows:
| Scenario | Tax Payable |
|---|---|
| Current rules (before April 2027) | £11,432 |
| After April 2027 | £12,929 |
| Increase | £1,497 |
Total Landlord Tax Increase: £5,443
Adding the two together — the £3,946 from Section 24 and the £1,497 from the April 2027 rate rise — this landlord is paying £5,443 more in tax than before these two changes. On real profits of £50,000, that’s an increase of almost 11%.
Why Landlords Are Selling Up
It’s no surprise that so many landlords are leaving the market. Zee points out that big corporates such as BlackRock and Lloyds Bank are buying properties in tax-efficient structures and effectively taking over the UK rental market. It’s worth asking yourself whether or not this is acceptable.
The typical landlord has just been hit with an extra 11% on top of rising business costs and tax thresholds that haven’t moved for about a decade. For many, owning property in your own name is becoming unaffordable.
Your Options: Sell, Incorporate or Do Nothing
Section 24 hits residential property first, since commercial property doesn’t have the mortgage restriction — but the new property income rates are expected to apply to all rental income. There are only a few real solutions:
Option 1: Sell and Pay Capital Gains Tax
Exiting the property market gets rid of the headaches, but it triggers Capital Gains Tax, which can be painful. You also lose the rental income, so it’s important to be mindful of both. For those who do want to exit, Zee suggests doing so before any future rise in capital gains tax.
Option 2: Incorporation, SDLT and CGT
Incorporation means moving property from your own name into a limited company. It requires specialist knowledge as if it isn’t done properly, it can trigger Stamp Duty Land Tax (SDLT) in England as well as Capital Gains Tax. In certain cases these can be mitigated, so getting good advice is essential. Zee sees this as probably the only real solution for anyone wanting to stay in the property market.
Option 3: Do Nothing
Doing nothing is always an option, but you take the hit of the roughly 11% increase, and many landlords who have done nothing are finding it gets worse than ever.
Take Action on Your Property Tax with GoldHouse Accounting
With property income rates rising and Section 24 still in place, the question for landlords holding property in their own name is no longer whether to act, but how. At GoldHouse Accounting, our property accountants and wealth management consultants have helped many landlords incorporate their portfolios and weigh up the options, including the SDLT and Capital Gains Tax implications. Get in touch to find out which route makes sense for you.
This article reflects Zee’s personal views and analysis following the October 2026 Budget. The worked example uses rounded, illustrative figures and assumes the mortgage interest tax reducer rises to 24% from April 2027. It is not personalised tax advice — speak to a qualified tax advisor before selling, incorporating or restructuring your property portfolio.
