UK Tax Year 2026/27: Property Taxes — SDLT, CGT and Rental Income

Stamp Duty Land Tax (SDLT) 2026/27 — England and Northern Ireland

SDLT is payable on property purchases in England and Northern Ireland. The current rates for 2026/27:

Standard residential SDLT rates

SDLT is calculated on each band separately (not on the full price at the highest rate).

First-time buyer relief (2026/27)

The temporary relief that raised the FTB zero-rate threshold to £425,000 expired in March 2025. From April 2025 onward (and into 2026/27):

SDLT on a £350,000 FTB purchase:

• £300,000 × 0% = £0
• £50,000 × 5% = £2,500
• Total SDLT: £2,500 (vs £8,250 at standard rates on the same price: £125k×0% + £125k×2% + £100k×5% = £7,500)

Additional property surcharge (buy-to-let, second homes)

An additional 5% applies to each SDLT band on purchases where the buyer owns another dwelling:

SDLT on a £300,000 buy-to-let purchase:

• £125,000 × 5% = £6,250
• £125,000 × 7% = £8,750
• £50,000 × 10% = £5,000
• Total: £20,000 (vs £5,000 SDLT for a main residence purchase at the same price)

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Scotland — LBTT 2026/27

Land and Buildings Transaction Tax (LBTT) applies in Scotland:

FTB relief in Scotland: no LBTT on the first £175,000 for first-time buyers (higher than England's £300,000 in absolute terms but Scotland's thresholds differ).

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Wales — LTT 2026/27

Land Transaction Tax (LTT) applies in Wales:

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Capital Gains Tax on Property 2026/27

CGT on the disposal of residential property (excluding your main home via Private Residence Relief):

These rates were set by the October 2024 Budget and remain in force for 2026/27. They replaced the previous 18%/28% structure.

Annual CGT exempt amount: £3,000 — down from £6,000 in 2023/24 and £12,300 in 2022/23.

CGT calculation example

Sarah bought a rental flat in 2015 for £180,000. She sells in 2026/27 for £310,000.

• Sale proceeds: £310,000
• Purchase price: £180,000
• Improvement costs (new kitchen 2020): £15,000
• Legal fees on purchase + sale: £4,000
• Total gain: £310,000 − £180,000 − £15,000 − £4,000 = £111,000
• Less annual exempt amount: −£3,000
• Taxable gain: £108,000

If Sarah is a higher-rate taxpayer: £108,000 × 24% = £25,920 CGT

The 60-day reporting rule

Any gain on UK residential property must be:

1. Reported to HMRC via a Property Disposal Return within 60 days of completion
2. Tax estimated and paid within the same 60-day window

Late submission incurs automatic penalties starting at £100, rising to £10/day after 6 months.

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Private Residence Relief (PRR) 2026/27

Your main home is exempt from CGT under PRR — but the rules have specific conditions:

• Must be your only or main residence during the period of ownership
• Final 9 months of ownership are always deemed qualifying residence (even if you've moved out)
• Letting relief was abolished for post-April 2020 periods (except in specific circumstances where the landlord also lived in the property)

PRR for a property lived in and then let

James bought a house in 2012, lived in it for 8 years, then let it for 6 years before selling in 2026/27 at a gain of £200,000.

• Total ownership: 14 years (168 months)
• Qualifying periods: 8 years lived + final 9 months = 8.75 years (105 months)
• PRR fraction: 105/168 = 62.5%
• Exempt gain: £200,000 × 62.5% = £125,000
• Chargeable gain: £200,000 × 37.5% = £75,000 − £3,000 exempt = £72,000 taxable
• CGT at 24% (higher rate): £17,280

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Rental Income Tax 2026/27

Section 24 — still in force

Individual landlords cannot deduct mortgage interest from rental income. Instead:

• Calculate rental profit excluding finance costs
• Pay income tax on the higher profit figure at your marginal rate
• Receive a 20% tax credit on finance costs

Effect on higher-rate landlord:

• Rental income: £20,000
• Other expenses (maintenance, insurance, agent fees): £3,000
• Mortgage interest: £14,000
• Taxable rental profit (Section 24): £20,000 − £3,000 = £17,000
• Tax at 40% on £17,000 = £6,800
• Less 20% credit on £14,000 mortgage interest = −£2,800
• Net rental tax: £4,000

Without Section 24 (old rules), profit would be £3,000 and tax at 40% = £1,200. Section 24 costs this landlord £2,800 extra per year.

Allowable deductions still available

Despite Section 24, landlords can deduct:

• Letting agent fees and management costs
• Maintenance and repair costs (not capital improvements)
• Insurance (buildings, contents, rent guarantee)
• Ground rent and service charges (leasehold)
• Accountancy and legal fees relating to the letting
• Furniture replacement (replacement of domestic items relief)

Furnished Holiday Lettings (FHL) — abolished April 2025

The FHL regime, which gave landlords of short-term holiday lets access to capital allowances and BADR, was abolished from 6 April 2025. Properties previously qualifying as FHL are now taxed as standard residential rentals from 2025/26 onward — this carries forward into 2026/27.

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Mortgage Interest and Companies

A limited company buying property as a buy-to-let:

• Can deduct 100% of mortgage interest as a business expense (Section 24 does not apply)
• Pays Corporation Tax (19% for profits under £50,000; up to 25% for higher profits)
• But distributions to shareholders as dividends attract Dividend Tax (8.75%/33.75%/39.35%)

Despite the company route's tax advantages, mortgage rates for limited companies are typically 0.5–1.5% higher, and incorporation triggers SDLT as if it were a new purchase — limiting the practical appeal except for larger portfolios.

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Non-Resident Landlords

Landlords resident outside the UK:

• Must register with the Non-Resident Landlord Scheme (NRL Scheme)
• Letting agents deduct basic-rate income tax at source unless HMRC approves gross payment
• File a UK Self Assessment return to reconcile at marginal rates
• UK property is within the scope of UK CGT — 60-day reporting applies to disposals

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