Landlords face £36,000 ‘tax squeeze’ from property tax hike
Landlords face a further tax ‘squeeze’ of up to £36,000 over 25 years when higher property income tax rates come into effect from April 2027.
Wealth manager Rathbones said the decision will hit small-scale retired landlords who rely on buy-to-let (BTL) properties to supplement their income.
From April 2027, landlords will pay four percentage points more tax on property income than they do today, following increases announced across the past two Budgets.
Rates will rise from 20% to 24% for basic-rate taxpayers, 40% to 44% for higher-rate taxpayers and 45% to 49% for additional-rate taxpayers.
According to Rathbones’ analysis, during the first year that the higher property tax kicks in, landlords in the North East would pay an additional £380, while landlords in London would pay £1,122 extra in tax, assuming rental income rises by 2% annually.
Over a decade, the cumulative impact ranges from an extra £4,152 to £12,288, depending on where the properties are based, rising to more than £12,000-36,000 over 25 years.
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Illustrative impact of four-percentage-point increase across property income tax bands
| Region | Average monthly rent | One year | Five years | 10 years | 20 years | 25 years |
| London | £2,338 | £1,122 | £5,840 | £12,288 | £27,267 | £35,946 |
| South East | £1,438 | £690 | £3,592 | £7,558 | £16,771 | £22,109 |
| East of England | £1,298 | £623 | £3,242 | £6,822 | £15,138 | £19,956 |
| South West | £1,251 | £600 | £3,125 | £6,575 | £14,590 | £19,234 |
| West Midlands | £983 | £472 | £2,455 | £5,167 | £11,464 | £15,113 |
| North West | £975 | £468 | £2,435 | £5,124 | £11,371 | £14,990 |
| East Midlands | £928 | £445 | £2,318 | £4,877 | £10,823 | £14,268 |
| Yorkshire and the Humber | £869 | £417 | £2,171 | £4,567 | £10,135 | £13,360 |
| North East | £790 | £379 | £1,973 | £4,152 | £9,214 | £12,146 |
Source: Rathbones/ONS Private rent and house prices, UK – October 2026
The change could be particularly significant for small private landlords who rely on property income in retirement, according to Rathbones.
Government research found that almost a third (31%) of private landlords surveyed in England were small-scale retired landlords, typically owning one or two properties and viewing their portfolios as investments to supplement retirement funds.
Furthermore, Rathbones’ New Retirement Reality research found one in 10 current retirees already receive rental income from property, while 39% expect property to help fund retirement. Among those planning to use property, 42% expect to generate rental income.
Charlie Newsome, senior investment director, said: “For a generation of retirees, bricks and mortar have become an important part of the retirement income mix.
“Some invested in buy to let during their working lives, while others acquired property through inheritance and use the rental income to supplement pensions and savings.
“Owning an additional property can make someone look asset-rich on paper, but that doesn’t necessarily mean they’re cash-rich in retirement. For some, rent helps bridge the gap between pension income and everyday spending, so a higher tax take could be felt well beyond the wealthiest landlords.”
