Buy-to-let landlords could face tax bills that are higher than their annual rental profits from the 2027/28 tax year, according to new analysis from the Intermediary Mortgage Lenders Association (IMLA). The IMLA warns that some investors could pay an effective tax rate of 124% on rental profits.
This follows the October 2026 Budget, which included a further two percentage point increase in income tax on rental profits. Combined with previous increases, this will raise basic, higher, and additional rates on rental income to 24%, 44%, and 49% respectively for the 2027/28 tax year. These increases apply to landlords who own properties personally, rather than through limited companies.
IMLA's report highlights the impact on mortgaged landlords, who can no longer fully deduct mortgage interest when calculating taxable income. For example, a landlord earning a £100,000 salary could face a tax bill equivalent to approximately 124% of their rental profit in 2027/28, where the tax attributable to rental income would exceed the property's annual profit before tax.
The report suggests that the widening tax difference between personal and corporate ownership could accelerate a shift towards limited company buy-to-let investment. However, transferring an existing property to a company may involve Stamp Duty Land Tax and Capital Gains Tax liabilities.
Between November 2022 and August 2026, the number of mortgaged buy-to-let properties fell by 157,000. IMLA notes this does not necessarily mean an equivalent reduction in privately rented homes, as properties sold by individual landlords may be acquired by other investors, including those operating through limited companies.