Budget 2026: What It Means for Landlords and the Self-Employed

Tax Queen

Tax Expert @ Pie

4 min read

What You Need to Know

Budget 2026 doesn't change the return you file by 31 January 2027 for the 2025-26 tax year. Most of the changes start on 6 April 2027, so you have time to plan, especially if you earn rent or savings interest.

The rates and dates below come from the Treasury's Red Book (the official Budget document), which was published after the Chancellor's statement on 28 October 2026. They haven't yet been checked against HMRC guidance. [Editor Note: Unverified figure - check against HMRC guidance]

Are you due to join Making Tax Digital for Income Tax as a sole trader or landlord from April 2027? If so, the Budget brings a 12-month penalty easement for new joiners. In practice, HMRC will go easier on penalties during your first year of quarterly digital updates.

Higher Tax on Rental and Savings Income

From 6 April 2027, rental profits will be taxed at 24%, 44% and 49% at the basic, higher and additional rates. That's two percentage points above the rates already announced. These property rates apply in England, Wales and Northern Ireland.

The same rates will apply to savings interest across the whole UK, but only to taxable interest earned outside tax-free accounts such as ISAs. The Cash ISA limit stays at £20,000.

Higher rates mean a bigger bill for the 2027-28 tax year. They could also mean larger payments on account, which are advance payments towards the following year's bill. Our guide on how to budget for your Self Assessment tax bill can help you start setting money aside.

Capital Allowances, Payments on Account and VAT

Capital allowances let you deduct the cost of business equipment from your taxable profits. The main-rate first-year allowance rises to 50% for qualifying spending from 1 January 2027. The main writing-down allowance (the yearly deduction on any cost you haven't claimed yet) falls to 12% from April 2027.

Many sole traders already claim the full cost through the Annual Investment Allowance, so check which option suits you before you buy. Our guide to declaring capital allowances on your Self Assessment explains how each one works.

From April 2029, the government plans smaller, more regular payments on account. From October 2027, online marketplaces will collect VAT on sales by UK businesses that sell more than £90,000 through them. The 5p fuel duty cut and the freeze will also continue until 1 July 2027.

What the New Rates Mean in Pounds

Here's a simple example for a landlord with £12,000 of rental profit, all of it taxed at the same rate. In 2026-27, rental profit is taxed at 20%, 40% and 45%.

Basic rate: £2,400 now, rising to £2,880 at 24%, which is £480 more
Higher rate: £4,800 now, rising to £5,280 at 44%, which is also £480 more
Additional rate: £5,400 now, rising to £5,880 at 49%

Allowable expenses still reduce your profit as they do now, so your own figures will differ.

How Payments on Account Could Change

If your last Self Assessment bill was more than £1,000, and less than 80% of your tax was taken at source, HMRC usually asks for payments on account. These are two advance payments towards your next bill, due on 31 January and 31 July, each normally half of your previous year's bill.

They're based on your whole Self Assessment bill, so rental and savings income count as well as self-employed profits. A bigger 2027-28 bill can therefore push up the payments on account you make for 2028-29. If your income falls, you can ask HMRC to reduce them, but if you cut them too far you'll pay interest on the difference.

A Quick Checklist

Work out your rental profit and savings interest for 2026-27
Estimate what they'd cost at the new rates from 6 April 2027
Check whether your qualifying income brings you into Making Tax Digital from April 2027
Set aside a little extra each month for the higher bill
Keep this year's bank statements and letting agent summaries together, ready for your return

Getting Ready for April 2027

Higher property and savings rates and Making Tax Digital both arrive in April 2027, so now is a good time to tidy up your records. If you know your rental profits, interest and equipment costs, it's easier to estimate what you'll owe.

If you're a landlord, sole trader or freelancer, Pie Tax is self-assessment software that gathers your income in one place and sorts your allowable expenses. That lets you see how these Budget changes could affect your bill before they arrive.

Once your figures are clear, planning for the new rates feels far less daunting. Try Pie Tax for free and get your records in shape before April.