From April 2027, landlords will face higher income tax rates on rental income, followed by an additional annual surcharge on higher-value homes from April 2028.
For many buy-to-let investors, particularly those with larger or heavily mortgaged portfolios, these changes could significantly increase the overall tax burden. As a result, more landlords are beginning to question whether holding property personally remains the most efficient structure.
From April 2027, the income tax rates applying specifically to rental income will increase by two percentage points:
These increases will affect landlords who hold property in their personal name.
Properties held through companies will not be subject to these changes. Instead, they will remain within the corporation tax regime, where rates currently sit at 19% or 25% depending on profit levels.
Mortgage interest relief for individual landlords also remains restricted. Rather than deducting interest from rental profits, landlords in 2027 will receive a tax credit equal to 22% of their finance costs it is currently 20%. This means tax is effectively calculated before interest is deducted, which can leave some landlords paying tax on profits they have not actually received.
When combined with the higher income tax rates from 2027, landlords with significant borrowing are likely to feel the impact most.
Additionally, from April 2028, residential properties in England valued at £2 million or more are expected to face an additional annual council tax surcharge:
£2m–£2.5m: £2,500
£2.5m–£3.5m: £3,500
£3.5m–£5m: £5,000
£5m+: £7,500
Initial valuations will be based on property values as at April 2026 and reviewed every five years.
As property prices continue to rise, more homes could gradually fall within these thresholds over time.
Corporate ownership has increasingly become part of the conversation for landlords because companies benefit from:
However, incorporation is rarely straightforward and can involve significant upfront tax costs.
For capital gains tax purposes, transferring property to a company is treated as a disposal at market value, meaning CGT of up to 24% could arise even if no cash changes hands.
Stamp duty land tax can also apply to the company acquiring the property, often at the higher residential rates. In many cases, SDLT becomes the largest cost of incorporation.
While reliefs from CGT and SDLT may be available where the portfolio qualifies as a genuine property business, these rules are technical and eligibility can be limited.
Consider a landlord with a £900,000 portfolio generating £48,000 of annual rental profits and £16,000 of mortgage interest.
Under personal ownership, the taxable profit would remain £48,000. At a 42% tax rate, the income tax liability would be £20,160. After applying the 22% tax credit on the mortgage interest (£3,520), the tax payable would be £16,640.
After interest and tax, the landlord would retain roughly £15,360.
Under company ownership, the mortgage interest is fully deductible. The taxable profit becomes £32,000 and corporation tax at 19% would be £6,080, leaving £25,920 retained in the company.
If those profits are reinvested, the tax difference can be significant. However, once profits are extracted personally through dividends or salary, a second layer of tax will apply.
Incorporation will not be suitable for everyone. Many landlords will continue to hold property personally.
In these cases, income splitting between spouses can still be an effective planning strategy. Transfers between spouses are generally treated as taking place on a no gain, no loss basis for capital gains tax purposes, allowing rental income to be shared between two tax bands.
Where beneficial ownership differs from legal ownership, the income split may also be adjusted using a declaration of trust and Form 17.
Capital gains tax planning can also help reduce tax on future property disposals. Strategies may include staggering sales across multiple tax years or transferring part ownership to a spouse to utilise two CGT allowances.
With tax changes approaching in April 2027 and April 2028, now is a sensible time for landlords to review how their portfolios are structured.
For investors focused on long-term growth and reinvesting profits, corporate ownership can often provide advantages. For those relying on rental income personally or planning to sell properties in the near future, the analysis is often more complex.
What is clear is that property ownership structure is no longer a passive decision. Landlords should review their cash flow, understand the potential restructuring costs and consider their long-term plans before making any changes.
We regularly advise landlords and property investors on tax-efficient structuring, incorporation and long-term planning. Getting advice early can make a significant difference before the new rules take effect. If you would like to discuss how these changes could affect your property portfolio, please get in touch.
