Landlord tax rises from April 2027: how GCC investors should prepare

What is changing

The change is already law: the Finance Act 2026, which received Royal Assent on 18 March 2026, creates separate income tax rates for rental income from 6 April 2027, two percentage points above today’s rates. They apply to landlords who own property in their own name in England, Wales and Northern Ireland. Companies are not affected — they pay corporation tax instead.

• Basic rate: 20% → 22%
• Higher rate: 40% → 42%
• Additional rate: 45% → 47%
• Mortgage interest relief: the 20% tax credit rises to 22%

What it means if you live in the GCC

Non-resident landlords pay UK tax on UK rental profits, whatever their country of residence. Under the Non-Resident Landlord Scheme, letting agents deduct basic-rate tax from rent before paying it to you — that deduction is expected to rise to 22% in line with the new rate — unless HMRC has approved you to receive rent gross through form NRL1. Approval does not remove the tax: you still file a UK tax return each year, due by 31 January.

Many non-residents are not entitled to the UK personal allowance, so tax can start from the first pound of profit. Whether you qualify depends on your nationality and the tax treaty with your country of residence, so check this with a UK tax adviser.

A worked example

An investor living in Kuwait owns two apartments in their own name. Rental profit after running costs is £20,000 a year, and mortgage interest is £8,000. For individuals, mortgage interest is not deducted from the profit — tax is charged on the full £20,000, and a tax credit worth 20% of the interest (22% from April 2027) then reduces the bill. We assume no personal allowance:

• 2026/27: £20,000 × 20% = £4,000, less interest credit of £8,000 × 20% (£1,600) = £2,400 tax
• 2027/28: £20,000 × 22% = £4,400, less interest credit of £8,000 × 22% (£1,760) = £2,640 tax
• The increase: £240 a year, or 10% more tax on the same income

Personal name or a company?

For larger, mortgaged portfolios the gap widens. Individuals only receive a 22% credit for mortgage interest, even when part of their profit is taxed at 42% or 47%. A UK company deducts interest in full and pays corporation tax at 19% to 25%. Companies have their own costs, though: buying through one always attracts the 5% Stamp Duty surcharge, and taking money out has its own tax consequences.

Moving properties you already own into a company usually triggers Stamp Duty and capital gains tax, so it rarely pays to restructure. The structure decision is best made before each new purchase.

Steps to take before April 2027

• Apply for gross rent payments (NRL1) if you have not already, and keep your tax return up to date.
• Decide the ownership structure for any new purchase with a UK tax adviser before you reserve.
• Plan the timing of large deductible repairs: from April 2027 they reduce tax at the new, higher rates.
• Keep digital records. Making Tax Digital for Income Tax requires quarterly updates for landlords with qualifying income above £50,000 from April 2026, and above £30,000 from April 2027.
• Review rents and costs: a well-let, well-managed property absorbs a small tax rise easily.

How BPG helps

Our UK accounting and tax partners handle NRL1 applications, annual tax returns and ownership planning for GCC investors, so the new rates are built into your strategy rather than discovered on your tax bill.