From 6th April 2027, the property income tax rate is set to increase by 2% across the board. It is therefore important that landlords fully understand the implications of this change, so that they can ensure they pay the correct tax.
Who is affected?
This property income tax increase is currently only set to apply in England, Wales, and Northern Ireland. At present, Scottish landlords are not affected. But as the Scottish government is to be given the power to increase property income tax, this may change.
Separate income tax rates
To create the rate increase, there will be a separate set of property income tax rates. The basic rate will be 22%, and the higher rate for property will be 42%, while the property additional rate is set at 47%.
If you are unsure of what you need to pay or are confused by any other aspect of taxation on property income, consult an accountant. An internet search will help you find accountants in your area. For example, a search for accountants Bath will give results like //chippendaleandclark.com/accountants-near-me/bath/.
Finance costs
Landlords with residential finance costs are going to be less impacted by the changes, as relief for these finance costs is going to go up in line with the property basic rate, so from 6th April 2027, it will be set at 22%. In particular, this means that landlords with a large property portfolio and little or no financing will be more adversely affected by the rate changes than those with significant finance costs.