From 6 April 2027, UK residents who let a home abroad will pay income tax on that rent at new property income rates, set at the Budget on 28 October at 24%, 44% and 49%, because the law passed this year counts an overseas property business as property income.
After the Budget, it was not clear from the announcements alone whether the higher rates reached rent from a villa in Spain or a flat in Paris. The legislation answers it. This article explains what has changed for British owners of homes abroad, what has not, and what to review before April 2027. It is general information, not tax advice.
What the law now says
Finance Act 2026, dated 18 March 2026, created separate income tax rates for property income. Section 6 inserts a definition into the Income Tax Act 2007: property income is income charged under the property rules of the Income Tax (Trading and Other Income) Act 2005, meaning the profits of a UK property business or an overseas property business. Section 7 set the rates for 2027 to 2028 at 22%, 42% and 47%. At Budget 2026 the Chancellor raised them to 24%, 44% and 49%, to be legislated in the coming Finance Bill, according to Deloitte's summary. Today's rates are 20%, 40% and 45%. The Act also allows the Scottish Parliament and the Senedd to set their own property rates.
How rent from abroad is taxed
A UK resident pays UK tax on worldwide income, so rent from a home abroad is declared on the foreign pages of the tax return as an overseas property business. It is kept separate from any UK lettings: a loss abroad cannot be set against UK rental profits, or the other way round. Mortgage interest gives a tax credit at the basic rate rather than a deduction, and Finance Act 2026 links that credit to the new property basic rate; how the Budget's further rise feeds into it will be confirmed in the Finance Bill.
Tax paid abroad is not usually lost. HMRC's helpsheet HS263 explains that foreign tax credit relief is the lower of the foreign tax properly due, under any treaty, and the UK tax on the same income. Any excess foreign tax is not refunded. A simplified illustration, assuming the same £20,000 profit in both countries and a 20% local tax: a higher-rate taxpayer pays £8,000 in UK tax today, less a £4,000 credit, so £4,000 more. At 44% the UK tax would be £8,800 and the top-up £4,800. In practice the profit is calculated differently in each country, and the local rules on expenses, social charges and treaties change the answer.
Who is affected, and who is not
The rates apply to UK residents. Someone who has left the UK and is not resident is taxed in the UK only on UK income, so a home abroad falls outside these rules. People arriving in the UK after at least ten years abroad can claim the four-year foreign income and gains regime, which since April 2025 has replaced the remittance basis; HMRC's guidance includes overseas property profits in the income that can be relieved, at the cost of losing certain allowances for the years claimed.
Selling, and keeping records
Capital gains tax on a home abroad stays at 18% and 24%, unchanged by the Budget. The gain is worked out in sterling, so currency movements since purchase can create a taxable gain or reduce one, and tax paid abroad on the same gain can usually be credited. There is no 60-day UK reporting deadline for overseas sales; the gain goes on the self-assessment return.
Reporting is also changing. Under Making Tax Digital, UK residents count foreign as well as UK property income towards the qualifying threshold, which falls to £30,000 of gross income from April 2027, as we explained in our article on Making Tax Digital. Owners who have never declared rent from abroad can use HMRC's disclosure routes, and HMRC can look back up to 12 years for offshore matters, or longer in some cases.
Questions to review before April 2027
- How much UK tax you pay on top of the foreign tax at the new rates, given your band.
- Whether ownership between spouses or partners still makes sense, as each is taxed on their own share.
- Whether a planned sale, a change of use or a move abroad affects the timing.
These are questions for a qualified adviser in both countries. Our Budget 2026 article covers the UK lettings side.
Dolce Vita handles sales and lettings across the UK from Mayfair, and helps clients buy abroad through partner agencies. If the new rates have you reviewing a UK let alongside a home abroad, we can help with the UK side. Request a valuation; we acknowledge the same working day and return a written valuation within 24 to 48 hours.
Chris Dawson, Co-Founder
Sources: Finance Act 2026, sections 6 to 8, inserting section 17A into the Income Tax Act 2007 (legislation.gov.uk; Act dated 18 March 2026); Deloitte, Budget 2026: savings and property income tax rate increases, October 2026; HMRC, Foreign Tax Credit Relief (HS263), gov.uk; HMRC guidance on the four-year foreign income and gains regime (gov.uk); Vision Consulting, Overseas property tax for UK residents 2026/27, updated 3 November 2026; HMRC, Work out your qualifying income for Making Tax Digital for Income Tax, updated 11 September 2026; HM Treasury, Budget 2026, 28 October 2026.