Income Tax on Commercial Rent (and the 2027 Rise)
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
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Individual landlords pay income tax on commercial rental profit. From April 2027 the rates on property income rise by two percentage points, so it pays to understand the change now.
How rental profit is taxed now
An individual landlord pays income tax on the profit from letting, that is rent less allowable expenses. Until April 2027 the rates are the standard 20%, 40% and 45%. Unlike residential landlords, commercial landlords can deduct loan interest in full, because the Section 24 restriction does not apply.
The 2027 change
From 6 April 2027, income tax rates on property income rise by two percentage points to 22%, 42% and 47%. This was announced at the Autumn Budget 2025 and applies to individual landlords' property income, commercial included. The extra revenue helps fund the lower business-rates multipliers for retail, hospitality and leisure.
What it means
The personal allowance is set against non-property income first, so property profit is taxed at the higher property rates. For a higher-rate landlord, every 100 pounds of commercial profit will cost 42 pounds in tax from 2027, up from 40 pounds. It sharpens the case for looking at a company structure, where profits are taxed to corporation tax instead.
Plan ahead
Two points to weigh: the timing of income and expenditure around April 2027, and whether the ownership structure still suits you. See SPV vs personal ownership and the law reform tracker.
Is income tax on rental income going up?
Yes. From 6 April 2027, income tax on property income rises by two percentage points, to 22%, 42% and 47% for individual landlords.
Does the Section 24 interest restriction apply to commercial property?
No. Commercial landlords can deduct loan interest in full against rental profit.