For a landlord on a £100,000 salary with a £250,000 property and £150,000 mortgage, IMLA calculates tax attributable to rental income at 124% of rental profit in 2027/28. Profit positive. Tax bill larger.
What Has Happened?
IMLA published its report, The October 2026 Budget: Impact on the housing and mortgage markets, on 10 November. The Budget raised income tax rates on rental profits for personal-name landlords by two percentage points across all bands. From April 2027: basic rate 24%, higher rate 44%, additional rate 49%. The Budget's framing was incremental. IMLA's analysis is not.
The worked example IMLA runs is specific. A landlord earning £100,000 in employment income, holding a £250,000 property with a £150,000 mortgage, generating £4,365 of rental profit after all deductible costs. IMLA's calculation of the tax attributable to that property in 2027/28 comes out at approximately £5,414. That is 124% of the profit the property generates.
The mechanism is Section 24, the mortgage interest restriction introduced from 2017. Personal landlords cannot deduct mortgage interest as a business expense. Instead, the gross rent is added to their other income as taxable turnover, and a fixed 20% credit on mortgage interest is applied to the tax bill at the end. When a landlord's existing salary already sits above £125,140, the full rent amount is taxed at 49% from April 2027, and the 20% credit does not compensate. At high borrowing relative to yield, the arithmetic tips past 100%.
Limited companies are exempt from these rate rises. A limited company pays corporation tax at 25% on the actual rental profit after deducting mortgage interest in full. IMLA's report explicitly states it expects the Budget changes to accelerate the structural shift already under way from personal to corporate ownership. A NRLA survey run by Pegasus Insight after the Budget found 73% of 168 respondents expect the tax changes to lead to higher rents. 52% said they planned to sell property in the next 12 months. Stated intentions, not completed sales, but the direction is not ambiguous.
Why This Matters to UK Property Investors
The 124% figure creates a specific cohort of motivated sellers. A personal-name higher-rate landlord who runs their own numbers and finds the investment is net-negative after tax from April 2027 faces a decision that is essentially already made: exit before the new rates take effect, or absorb a loss. The exit decision has a natural deadline, which is Q1 2027 at the latest.
Compare that position with a limited company buyer purchasing the same asset. At 25% corporation tax on £4,365 rental profit, the tax bill is £1,091. Net profit after tax: £3,274. Same property, same tenant, same rent. What changed is who holds it. The asset is not broken. The personal holding structure is what stopped working.
For company buyers in Birmingham, Wolverhampton, Sheffield and Nottingham, this dynamic is live now. Those cities carry gross BTL yields of 7% to 9% on standard residential stock. At 25% corporation tax, a 7.5% gross yield property held in a limited company generates a genuinely positive net return after tax and financing costs. For the personal-name seller escaping a 124% tax burden, the buyer offering a clean limited company acquisition at a slight discount from full market value is offering real value, not just an exit. That matters for negotiating.
Rents are the other side. NRLA members expecting higher rents are not being optimistic: they are signalling that if the yield from the asset cannot be improved on the cost side, some will try to improve it on the income side. Tribunal data from the first 200 Section 13 cases already showed 73% of landlord rent increase applications being cut. Some of those increases were clearly above market. Others were landlords trying to pass through April 2027 tax costs and discovering that tribunals do not accept tax as a justification for above-market rent. That tension is worth watching through winter.
The Risks Investors Need to Understand
IMLA's 124% figure applies to a specific profile: employment income at £100,000, property at £250,000, mortgage at £150,000, annual profit at £4,365. Move the parameters and the percentage changes. A landlord on £50,000 salary, with the same property and mortgage, falls into the higher rate band rather than the additional rate. Their equivalent figure would be different. Lower, but the direction is the same and the marginal impact of the April 2027 rate rise is still material.
Incorporating an existing personal portfolio is not a clean solution. There are capital gains tax implications on the transfer of property from personal to corporate ownership, and in many cases SDLT as well on the full market value. For landlords holding property that has appreciated significantly, the cost of incorporation can exceed several years of tax savings from the lower corporation tax rate. IMLA's report does not say "incorporate everything". It says the gap between personal and corporate ownership has widened further and landlords need to think clearly about their structure. Some will incorporate. Some will sell to corporate buyers. Some will hold and absorb the tax. Each answer depends on the specific numbers.
The 52% sell-intention figure from the NRLA poll deserves careful reading. It is a sample of 168 NRLA members, surveyed a week after a Budget, before the financial reality had settled. That is not the same as 52% of all UK personal-name landlords completing sales in 2027. IMLA itself notes that falling rental income does not automatically trigger a sale: equity, expected price growth, holding period and disposal tax costs all affect the decision. Some landlords who said they would sell in November will recalculate and hold.
For buyers, the risk is in overestimating supply from this seller cohort. Not every personal-name landlord is at the additional rate. Many have low mortgages, strong yields or salary income below the higher rate threshold. The motivated sellers are real but they are a subset, and finding them takes work rather than waiting for them to appear on Rightmove.
Where the Opportunity Could Be
The sharpest opportunity is in the gap between the seller's tax position and the buyer's. A higher-rate personal landlord in Birmingham holding a £140,000 property with a £90,000 mortgage is facing 44% income tax on gross rent from April 2027, with only a 20% credit on mortgage interest. A limited company buyer at 25% corporation tax on actual profit, after deducting full mortgage interest, is a materially more efficient holder of that asset. Neither party is wrong in their view of the property: the buyer is simply in a better tax position to own it.
Reaching those sellers before they go through estate agents with full market valuations is where the best transactions sit. Landlords doing the April 2027 calculation this month are calling accountants, not Rightmove. A buyer introduced through a tax adviser or landlord network, who can demonstrate a quick clean limited company acquisition without chains, is ahead of the market by several months. That sourcing advantage typically shows up in acquisition price, not because sellers are naive but because they are genuinely solving a time-bound problem and the buyer's speed has real value.
Stoke-on-Trent, Bradford and Middlesbrough are three markets where this profile concentrates. High gross yields, significant personal-name older landlord presence, strong rental demand from NHS and university employment bases. A limited company buyer offering 92% to 95% of market value with a 6-week completion timeline is competing in a space where motivated sellers have fewer real alternatives than the number of estate agents in town suggests.
Arsh's Investor View
I want to be direct about what IMLA's report actually says, because there is a version of this story doing the rounds that is either too alarming or not alarming enough depending on who is writing it. The 124% figure is real, it applies to a specific landlord profile, and it is a signal that the tax environment for personal-name higher-rate landlords has moved from uncomfortable to structurally unworkable at meaningful leverage.
I have been saying since 2015 that Section 24 would force structural change in how landlords hold property. The Budget has accelerated that by pushing the rates two points further across each band. For landlords who incorporated early, the April 2027 changes are largely irrelevant: corporation tax at 25% on actual profit after interest has been a better deal than the personal rate for years. For landlords who held off, the IMLA worked example is the clearest illustration yet of what that delay costs.
My practical view: if you are a higher-rate or additional-rate personal-name landlord holding property with mortgage leverage above roughly 60%, run your own version of IMLA's example right now with your actual numbers. Not a general estimate. Your mortgage rate, your gross rent, your deductible costs, your other income. The 124% figure is not guaranteed to be your number. It might be lower. It might be higher. But you need to know what it actually is for your portfolio before deciding whether to hold, sell or restructure.
For buyers, I would be active in landlord networks and through tax advisers this month. The sellers emerging from this calculation in November and December are the most motivated cohort in the market. They are not distressed in the traditional sense, the properties are typically fine. The exit is tax-driven and time-bound. That is a different profile from someone who has to sell because of arrears or a broken chain, and it typically results in cleaner transactions.
How Property Investor App Can Help
Property Investor App lists UK buy-to-let opportunities including landlord-to-landlord transactions, where personal-name sellers exiting ahead of the April 2027 tax deadline are actively looking for limited company buyers who can move quickly. PIA's search tools let you filter by region, estimated gross yield and property type to compare deals across Birmingham, Wolverhampton, Sheffield, Stoke-on-Trent and Nottingham. For investors considering a limited company acquisition or a portfolio restructure, PIA connects buyers with specialist limited company BTL brokers who can price the full acquisition and financing costs across current product ranges from lenders including Paragon, Foundation Home Loans and Precise. Browse UK property investment opportunities at Property Investor App.
Key Takeaways
- IMLA published its October Budget analysis on 10 November 2026. For a landlord on a £100,000 salary holding a £250,000 property with a £150,000 mortgage and £4,365 annual rental profit, the tax attributable to rental income in 2027/28 is approximately £5,414, equal to 124% of the rental profit. The mechanism is Section 24: gross rent is added to other income and taxed at 49% from April 2027, with only a 20% credit on mortgage interest, not full deductibility.
- From April 2027, personal-name landlords pay 24% (basic), 44% (higher) or 49% (additional rate) income tax on rental income. Limited companies pay 25% corporation tax on actual profit after deducting mortgage interest in full. The Budget widened this gap by two percentage points across all bands and IMLA expects the shift from personal to limited company ownership to accelerate.
- A NRLA Pegasus Insight poll of 168 landlords after the Budget found 73% expect the tax changes to lead to higher rents and 52% plan to sell property within the next 12 months. These are stated intentions from a small sample taken shortly after the Budget, not measured outcomes, but the direction of landlord sentiment is consistent with the tax arithmetic.
- For limited company buyers, the motivated seller cohort emerging from the IMLA calculation is the most actionable acquisition opportunity of Q4 2026 and Q1 2027. These sellers are exiting a tax problem, not a property problem. The assets are typically sound. Reaching them through tax advisers, landlord networks and landlord-to-landlord channels before full market listing is where the best transactions will come from.
- Incorporating an existing personal portfolio is not automatically the right answer. Capital gains tax and stamp duty on a transfer from personal to corporate ownership can cost several years of corporation tax savings. Some landlords will incorporate, some will sell to corporate buyers, some will hold and absorb the cost. The right answer depends on the specific numbers: equity, mortgage rate, gross rent, existing income and expected holding period.
Frequently Asked Questions
What did the IMLA report say about landlord rental income tax from April 2027?
IMLA's November 2026 report on the October Budget analysed the impact of a two percentage point income tax rise across all bands for personal-name landlords from April 2027. For a landlord earning £100,000 in employment income and holding a £250,000 property with a £150,000 mortgage and £4,365 of annual rental profit, IMLA calculated the tax attributable to rental income in 2027/28 at approximately £5,414, equal to 124% of the rental profit. The result is driven by Section 24, which adds gross rent to other income at the top rate (49% additional rate from April 2027) with only a fixed 20% credit on mortgage interest, not full interest deductibility. Limited companies are unaffected by these rate rises and continue to pay 25% corporation tax on actual profit after deducting mortgage interest.
What are the new landlord income tax rates from April 2027 in the UK?
From April 2027, personal-name landlords pay income tax on rental income at 24% (basic rate, up from 20%), 44% (higher rate, up from 40%) and 49% (additional rate, up from 45%). The October 2026 Budget introduced a two percentage point rise across all bands. These rates apply to personal owners. Limited company landlords continue to pay 25% corporation tax on rental profits after deducting mortgage interest as a business expense, which is not permitted for personal-name landlords under Section 24.
Should I move my buy-to-let into a limited company before April 2027?
It depends on your specific numbers, not a general rule. Transferring property from personal to corporate ownership carries capital gains tax on any increase in value since acquisition and stamp duty on the full current market value. For landlords with low-leverage, low-appreciation properties, incorporation costs can exceed several years of corporation tax savings. For landlords with high mortgage leverage and income in the additional rate band, the case is stronger. The right approach is to model both the transfer costs and the ongoing tax difference under each structure for your specific portfolio, ideally with a property tax adviser, before the April 2027 deadline.
What does the IMLA report mean for UK rental prices?
IMLA does not explicitly forecast rent levels, but its report notes that the reduction in after-tax returns will push some landlords to review their rent levels and others to sell. A NRLA Pegasus Insight survey of 168 landlords after the Budget found 73% expect the tax changes to lead to higher rents. The first 200 Section 13 tribunal cases in 2026 showed 73% of landlord rent increase applications were reduced, suggesting that tribunals will not automatically ratify rent increases designed to offset tax costs. Supply leaving the private rented sector from personal-name sellers also puts structural upward pressure on rents in markets where corporate buyers do not replace them.
Where are UK landlords most likely to sell because of the April 2027 tax changes?
The sellers most likely to exit are higher-rate and additional-rate personal-name landlords with significant mortgage leverage, since they face the largest gap between pre-tax and post-tax returns under the new structure. Markets where this profile concentrates, with strong yields, significant older personal-name landlord presence and strong rental demand, include Birmingham, Wolverhampton, Bradford, Sheffield, Stoke-on-Trent and Middlesbrough. In those cities, the gross yield is typically 7% to 9%, which makes the asset work well for a limited company buyer paying 25% corporation tax, while the personal-name seller at 44% or 49% income tax finds it increasingly hard to justify holding.
