Whether you own a rental property or you live in one, what is coming in April 2027 is worth knowing about. Because this one lands on both sides of the front door.

I am a landlord. Two properties. And when I read the small print of what is heading our way, my first thought was not particularly printable.

From April 2027, the government is introducing higher tax rates on rental income — sitting two percentage points above what you pay on a salary. The stated reason is fairness. Rental income does not pay National Insurance the way earned income does, so they want to close that gap. On the surface, reasonable. In practice, it lands on top of a decade of changes that have already made life significantly harder for small landlords.

Meet Claire. She has one rental property. She bought it in her forties as a way of building something towards retirement. Her tenant Sophie has lived there for three years and considers it home. Claire is not a property tycoon. She has a mortgage on the flat, she manages it herself, and the monthly profit, once the mortgage is paid, is modest.

Under tax rules introduced in 2017, Claire is already taxed on her full rental income before her mortgage costs are taken into account. What this means in plain terms is that she pays tax on money that goes straight to the bank, not into her pocket. The new 2027 rates push that bill higher still. Claire does the sums one evening and realises the flat is no longer returning what she planned for. She is not sure what to do. Sophie does not know any of this yet.

Then there is David. He is a teacher with one flat and a tenant called Marcus. David's situation is more exposed than Claire's because his salary already puts him near the higher rate tax band. The way rental income is currently calculated pushes him over that threshold, and from 2027 the higher rate goes up to 42%. The flat David bought to supplement his pension is now costing him considerably more than he expected. Marcus gets a letter about his rent.

These are not unusual stories. Nearly half of all landlords in the UK declared rental income of £10,000 or less last year. This is not, mostly, wealthy investors with portfolios and accountants on speed dial. It is ordinary people with one or two properties and a mortgage, trying to make sensible long term financial decisions in a landscape that keeps shifting.

And it is shifting again. The personal allowance is frozen until 2031. The Renters Rights Act, which came into force this year, has introduced important new protections for tenants alongside new responsibilities for landlords. Taken together with the stamp duty surcharge introduced years ago and the mortgage interest changes, the picture for small landlords is considerably less attractive than it was even five years ago.

Here is the part that matters if you are a tenant. The Office for Budget Responsibility has estimated that the new tax rates could push rents up by around £20 to £25 a month on a typical tenancy in England. When landlords cannot make the numbers work, they either sell up or they raise rents. Either way, tenants feel it. A policy sold as fairness has a way of passing its costs down the chain.

So what should you do?

If you are a landlord, do not wait until 2027. Talk to an accountant who understands property now, while you still have time to make calm, considered decisions rather than reactive ones. Look honestly at what each property is returning. Ask the right questions before the deadline is upon you.

If you are a tenant, this is worth knowing as context for what may be coming. It does not make a rent increase easier to absorb. It does mean that if one arrives, you will understand why, and you will know your rights under the Renters Rights Act when it does.

Sophie and Marcus did not create this situation. Neither, really, did Claire and David. What is happening in the private rental market right now is the result of years of policy decisions landing all at once on people who were simply trying to make reasonable choices with their money.

More tax. Less return. Higher rents. The same homes, working harder, for everyone.