The Tax Change Coming In April 2027 That Most Landlords And Savers Haven’t Heard About Yet

When you hear that the government is casting around for people to tax in order to pay the benefits bill, this is exactly what that means. But this particular tax hike has largely flown under the radar.

The government has introduced a new set of income tax rates that will hit landlords and savers from April 2027. Not a tweak. A separate, higher rate of tax on rental income and savings, sitting outside the main income tax rates most people know. If you own property personally, or you have savings outside an ISA, this one is for you.

What is happening

From 6 April 2027, both rental income and savings income will be taxed at higher rates across every tax band, by two percentage points.

For rental income from privately held property, that means basic rate taxpayers go from 20% to 22%. Higher rate from 40% to 42%. Additional rate from 45% to 47%. The same rises apply to savings interest sitting in ordinary bank or savings accounts, meaning accounts that are not an ISA or pension.

One important distinction worth flagging: these changes apply to individuals who own property in their own name and pay income tax on the rent. If you own property through a limited company, this particular change does not apply to you in the same way, because companies pay corporation tax rather than income tax.

If you are not sure which applies to you, an accountant can tell you quickly.

Two percentage points sounds small. Here is why it is not

The people this change hits are not necessarily the ones with large portfolios. I think it is worth being honest about that, because the conversation around landlord taxation tends to focus on the top end.

Think about the accidental landlord who kept a flat when they moved and has been renting it out for a decade. Or the person who saved diligently into cash savings accounts over the years and now earns meaningful interest on that money.

Or the higher rate taxpayer who has been meaning to review their finances for two years and has not got round to it.

Two percentage points on £10,000 of rental income is an extra £200 a year. Not enormous on its own.

But this change does not arrive on its own. It follows restrictions to mortgage interest relief, changes to capital gains tax, and dividend tax increases that came in from April 2026.

The direction of travel on property and investment income over the past few years has been consistently one way.

How this interacts with capital gains tax

Capital gains tax, the tax you pay when you sell an asset for more than you paid for it, is not directly changing in April 2027. If you sold a rental property, basic rate taxpayers currently pay 18% on any gain, and higher rate taxpayers pay 24%. Those rates are staying the same for now.

But here is the part I think most people miss. The tax band you sit in when you sell a property is determined by your total income that year, including rental income.

So if the new higher income tax rates push more of your earnings into the higher rate band, you could end up paying more capital gains tax on a sale than you would have before, even though the CGT rates themselves have not changed.

The two things feed into each other.

There is also a £3,000 annual capital gains tax exemption, meaning the first £3,000 of any gain you make in a tax year is tax-free. It is not generous, it has been cut significantly in recent years, and it does not carry over to the following year. But if you are considering selling an asset, it is worth factoring in.

There is also an ISA deadline running in parallel

An ISA, or Individual Savings Account, is an account where your money grows free from income tax and capital gains tax. You can put up to £20,000 a year into ISAs, split however you like between cash and investments.

This tax year is the last one where you can put the full £20,000 into a cash ISA specifically. From April 2027, the cash ISA limit for anyone under 65 drops to £12,000. The overall £20,000 limit stays, so you could put £12,000 into cash and £8,000 into a stocks and shares ISA. But the option to put all £20,000 into cash closes after this year and does not come back.

If you have been putting off topping up a cash ISA, I would not leave it much longer.

What to actually do before April 2027

I am not going to tell you what to do with your money, because the right answer depends entirely on your own circumstances, income, plans, and wider financial position. But I think it is useful to name what is worth thinking about.

If you have rental income from property you own personally, understanding what the rate change means for your specific situation is the starting point. Not at the end of March 2027.

Now, while there is still time to make decisions.
If you have savings interest coming in from accounts outside an ISA, the case for moving that money inside an ISA has just got stronger. That is exactly what they are there for.

And if you have been meaning to look at how your income-producing assets are structured, the window to do that before these rates land is open right now. You cannot go back and change what you have already earned. But you can make decisions now about what happens next.

The honest tension in all of this is that the tax system keeps getting more complicated while the time and resource most people have to navigate it stays exactly the same. That gap is not closing.

The April 2027 deadline is closer than it looks.

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This article is for information only and does not constitute financial advice. Tax rules can change and their effect depends on your individual circumstances. Please speak to a qualified accountant or financial adviser before making decisions about your tax position or investment strategy.

Sources: Finance Act 2026, sections 5 to 7; House of Commons Library research briefing CBP-10450, May 2026; ATT 2026/27 tax year guide; Deloitte Taxscape, November 2025.