By Farhan Nagda FCCA MBA

From 6 April 2027, landlords in England and Northern Ireland will face separate property-income tax rates of 22%, 42% and 47%. The legislation is already enacted, so property owners now have a defined window to review whether their existing structure remains commercially appropriate.

The increase is two percentage points at each level compared with the present main rates. It may look modest in isolation, but its effect compounds across a portfolio—and it arrives alongside restricted finance-cost relief for individual residential landlords, higher dividend rates and continuing compliance changes under Making Tax Digital.

This does not mean every landlord should incorporate or reorganise ownership. Moving property can itself produce Capital Gains Tax (CGT), Stamp Duty Land Tax (SDLT), refinancing costs and future tax charges when profits are withdrawn. The right question is not “Which structure pays the lowest headline rate?” but “Which structure produces the best result across the property’s full lifecycle?”

What is changing?

Finance Act 2026 creates separate rates for property income from the 2027/28 tax year:

• Property basic rate: 22%;
• Property higher rate: 42%; and
• Property additional rate: 47%.

The changes apply to income from UK and overseas property businesses within the legislation. The ordering rules for allowances and reliefs are also changing, which can affect taxpayers with several types of income. Wales and Scotland have separate constitutional considerations, so location and taxpayer status must be checked rather than assumed.

For residential landlords affected by the finance-cost restriction, mortgage interest generally does not reduce taxable rental profit in the same way as an ordinary business expense. Instead, qualifying finance costs normally produce a basic-rate tax reduction. From April 2027, that reduction is expected to use the 22% property basic rate.

The headline increase can conceal a larger portfolio effect

Consider an individual higher-rate taxpayer with taxable property profit of £40,000 after the appropriate rental deductions but before considering their wider personal position. A two-percentage-point increase represents an additional £800 a year on that figure alone.

That simplified number is not a planning recommendation. The actual impact may differ because of finance-cost relief, jointly owned property, allowances, losses, other income and the way taxable income moves through the rate bands. It does, however, show why landlords should model the change using their own portfolio rather than dismissing it as “only 2%”.

Farhan’s specialist view: do not restructure a property portfolio in response to one tax rate. Model rental profit, borrowing, CGT, SDLT, refinancing, ownership objectives and the eventual exit together. A lower annual tax bill can be outweighed by the cost of moving the assets or extracting the proceeds.

Does a limited company solve the problem?

A company is subject to Corporation Tax rather than the new personal property-income rates, and interest incurred wholly and exclusively for its property business may receive a different tax treatment. Those features can make corporate ownership worth examining, particularly where profits will be retained and reinvested.

But a company is not automatically better. The comparison may need to include:

• Corporation Tax on rental profits and future gains;
• Income Tax on salary, dividends or other value extracted personally;
• the increased dividend ordinary and upper rates applying from April 2026;
• accountancy, Companies House and mortgage costs;
• the availability and pricing of corporate borrowing; and
• the intended use of sale proceeds and long-term succession plan.

A landlord who needs most of the rent for personal expenditure can reach a very different answer from an investor who intends to retain profits for further acquisitions.

The cost of transferring existing properties

Even where future company ownership appears attractive, transferring an established portfolio is a separate transaction requiring its own advice. A transfer can be treated as a disposal for CGT purposes, often using market value where the parties are connected.

The acquiring company may also face SDLT. Whether any relief is available depends on detailed facts and law; it should never be assumed from an online incorporation illustration. Existing mortgages may need to be redeemed or replaced, and lenders may value the portfolio or rental coverage differently.

Claims that a partnership or other arrangement automatically removes CGT, SDLT or the finance-cost restriction require particular caution. HMRC updated Spotlight 63a in April 2026 to restate its view that promoted “hybrid” property-business arrangements do not achieve the advertised results and may expose landlords to tax, interest, penalties and substantial fees.

Who should review their position now?

A review is particularly relevant where:

• property income already falls into the higher or additional rate;
• borrowing is substantial and finance-cost relief materially affects the effective tax rate;
• the landlord intends to acquire further properties;
• profits can be retained rather than withdrawn for personal spending;
• ownership is shared between spouses, relatives or business partners;
• a sale, refinance, gift or succession event is expected within the next few years; or
• the portfolio has previously been placed into a partnership, LLP, trust or company without a full tax review.

The review should start with verified figures: property values, base costs, debt, annual rent, operating expenses, ownership percentages and personal income requirements. Only then can the available structures be compared on consistent assumptions.

Why act before April 2027?

The objective is not to rush a transaction before a deadline. It is to create enough time to test the options properly, obtain valuations, speak to lenders and coordinate tax advice with legal documentation.

Some landlords may conclude that no restructuring is justified. Others may adjust future purchases rather than transfer existing assets, change borrowing or profit-retention plans, or phase a wider strategy. The value of the review is knowing the likely cost before the new rates begin—not discovering it after another tax year has passed.

How Edge Accountants can help

Edge Accountants provides specialist property-tax advice for landlords, investors and property companies. We model the personal and corporate tax position alongside CGT, SDLT, borrowing, profit extraction and the planned exit, giving you a commercial comparison based on your actual portfolio.

Our advice is designed to answer the decision that matters—whether changing anything is worthwhile—without forcing a standard structure onto every landlord.

This article provides general information and does not constitute tax, legal, mortgage or investment advice. The appropriate treatment depends on the complete facts and law applying at the relevant time.