The Autumn Budget has added another cost for many private landlords. From 6 April 2027, separate Income Tax rates applying to property income are set at 24% for the basic property rate, 44% for the higher rate and 49% for the additional rate.
There is an important detail behind those figures. The 2025 Budget had already introduced separate property income rates of 22%, 42% and 47% from April 2027. The latest Budget has increased each of those planned rates by a further two percentage points. Compared with the ordinary 20%, 40% and 45% Income Tax rates applying to most property income in the current 2026 to 2027 tax year, that represents a four percentage point difference. HMRC’s latest policy paper is here: https://www.gov.uk/government/publications/income-tax-changes-to-tax-rates-for-property-and-savings-income/income-tax-changes-to-tax-rates-for-property-and-savings-income.
For landlords already dealing with mortgage costs, regulation and property maintenance, the obvious question is whether buy to let can still produce worthwhile returns.
Who will the new rates affect?
The change principally affects individuals and partnerships receiving property income. HMRC says the new rates will apply from the 2027 to 2028 tax year. The precise tax treatment can depend on where someone lives and how the property is owned, so landlords should seek specialist tax advice for their own circumstances.
The Budget describes the measure as an additional two percentage point increase to the property income rates already planned for April 2027. The government estimates the change will raise £575 million in 2028 to 2029, once it has been in place for a full tax year. Budget details are here: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html.
Why the impact depends on the individual landlord
A higher tax rate does not automatically turn a profitable property into an unprofitable one. Its impact depends on rental income, allowable expenses, borrowing costs, the landlord’s tax position and how much equity is tied up in the property.
Mortgage finance is particularly important. Individual residential landlords generally cannot simply deduct all mortgage interest from rental income before calculating their tax bill. Instead, residential finance costs are dealt with through a tax reduction. Existing legislation links that relief to the property basic rate from 2027.
This means landlords should calculate expected returns using their actual post tax cash flow rather than relying on a headline rental yield.
Mortgage costs are part of the equation too
The tax increase comes at a time when borrowing costs have moved higher again. On 5 November, the Bank of England increased Bank Rate from 3.75% to 4%, its first rise in more than three years, after CPI inflation reached 3.5%. The next rate decision is due on 17 December.
That does not mean every buy to let mortgage will immediately become more expensive, particularly where a landlord is already on a fixed rate. But borrowers approaching a remortgage could face a very different cost base from the one they had when their current deal began.
For highly leveraged properties, the combination of mortgage payments and higher tax can put considerably more pressure on the margin between rental income and running costs.
Could the tax change affect mortgage affordability?
Buy to let lenders generally assess borrowing differently from residential mortgages. A key measure is the interest coverage ratio, which compares expected rent with stressed mortgage interest costs.
The Prudential Regulation Authority expects lenders to take relevant property costs and tax liabilities into account when assessing affordability. Its current underwriting framework also requires lenders to consider likely future interest rates and refinancing risk. The Bank of England guidance is here: https://www.bankofengland.co.uk/prudential-regulation/publication/2016/underwriting-standards-for-buy-to-let-mortgage-contracts-ss.
The Budget change does not automatically mean every lender will immediately reduce the amount a landlord can borrow. But tax position is relevant to buy to let underwriting, so investors should not assume that a property which passed an affordability test previously will produce exactly the same result when refinancing or taking additional borrowing.
Is there still money to be made in buy to let?
The market has certainly not disappeared. UK Finance recorded 58,051 new buy to let loans in the second quarter of 2026, worth £10.7 billion. The average gross rental yield was 7.27%, broadly unchanged from a year earlier. Its latest data is here: https://www.ukfinance.org.uk/data-and-research/data/buy-to-let-lending.
But gross yield is not profit. Mortgage interest, tax, insurance, maintenance, management costs, void periods and regulatory requirements all reduce the amount a landlord ultimately keeps.
That makes the answer to whether buy to let is still “worth it” increasingly property specific. A well priced property with strong rental demand, a sensible mortgage and enough margin for unexpected costs can look very different from a highly leveraged property generating only a narrow surplus.
What existing and prospective landlords should review
Existing landlords may want to model their expected position from April 2027 before their next remortgage rather than considering the tax and mortgage decisions separately. Prospective investors should look at post tax cash flow, not just the rent and headline mortgage rate.
The changes are not necessarily a reason to leave or avoid buy to let, but they make careful selection and realistic financial planning more important.
If you are reviewing an existing portfolio, approaching a remortgage or considering a new buy to let purchase, Altura Mortgage Finance can help you understand the mortgage options available and how the financing fits into the wider numbers. Tax advice should be obtained separately from an appropriately qualified adviser.
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