Owning rental property has always come with its fair share of responsibilities — dealing with tenants, maintaining homes, and staying on top of paperwork. However, over the last few years, one area has become a major issue for landlords across the UK: tax.
From tightened mortgage relief rules to rising Stamp Duty charges, it’s becoming harder and harder for landlords to turn a healthy profit without getting tripped up by the growing list of tax obligations. And now, as we head into 2025, even more changes are coming down the line.
Whether you’ve been letting properties for years or you’re just dipping your toes into buy-to-let, it’s more important than ever to understand how the latest tax rules affect you — and what steps you can take to protect your profits.
In this guide, we’re cutting through the noise and breaking down what landlords need to know about tax in 2025. Let’s dive in.
Tax Changes Affecting Landlords Today
In recent years, landlords have been hit with a raft of tax changes that have impacted their bottom line.
Here’s a rundown of the key reforms that have caused the biggest stir of late:
Section 24 and the Loss of Mortgage Interest Relief
The gradual phasing out of mortgage interest tax relief, known as Section 24, has been one of the most controversial changes for landlords.
Prior to 2017 (with the full roll-out in 2020), you could deduct your mortgage interest costs from your rental income before calculating your tax bill.
However, this relief has been gradually replaced with a 20% tax credit, which is much less generous, particularly for higher-rate taxpayers.
Stamp Duty Hikes for Investment Properties
Since 2016, buy-to-let investors and second home buyers in England and Northern Ireland have faced a 3% Stamp Duty Land Tax (SDLT) surcharge on top of standard rates.
From April 1, 2025, further changes to the SDLT system took hold. Not only will the higher surcharge remain at 5%, but the Stamp Duty thresholds themselves will be reduced, meaning more of the property’s value will be subject to higher tax rates.
The updated SDLT bands for additional property purchases from April 2025 are as follows:
- Up to £125,000: 5%
- £125,001 to £250,000: 7%
- £250,001 to £925,000: 10%
- £925,001 to £1.5 million: 15%
- Above £1.5 million: 17%
These extra costs are making investors think twice about expanding their portfolios or even getting into buy-to-let in the first place.
Some are looking at cheaper properties that don’t come with such a hefty tax price tag, while others are considering raising rents to offset the hit. Either way, it’s another squeeze on landlords’ bottom lines.
Capital Gains Tax (CGT) on Property Sales
Selling up isn’t the easy escape it used to be either, thanks to tougher CGT rules. Basic-rate taxpayers now face an 18% CGT bill on their gains, while for higher and additional-rate payers it’s a punishing 28%.
To make matters worse, the tax-free CGT allowance has been chipped away at and valuable reliefs like lettings relief have been axed altogether.
All of this means landlords are often left with a much bigger tax headache when they come to cash in their investments.
Making Tax Digital Means More Red Tape
Landlords are going to have to get a lot more tech-savvy in the next few years, thanks to the rollout of Making Tax Digital (MTD) for Income Tax. This means keeping all your records digitally and filing quarterly updates to the taxman, on top of your usual yearly tax return.
If you earn over £50,000 from property, you’ll be roped into MTD from April 2026. Earn between £30,000 and £50,000? You’ll be joining the fun from April 2027.
While it might drag your bookkeeping into the 21st century, MTD is going to mean more work and yet another set of deadlines to worry about.
Getting some decent accounting software and leaning on your accountant will be key to staying on the right side of the new rules.
Renters’ Reforms Put Pressure on Profits
The government’s flagship Renters’ Reform Bill is also set to shake things up.
The headline change is the scrapping of Section 21 ‘no fault’ evictions, which will make it harder to turf out problem tenants.
Alongside this, the bill also promises to beef up tenants’ rights, including more protection around rent hikes and the freedom to keep pets and make reasonable changes to their properties.
On the flip side, landlords are going to be held to higher standards when it comes to property conditions and repairs.
While the finer details are still being hashed out, the reforms are likely to mean more responsibilities and costs for landlords.
With the bill set to come into force later in 2025, it’s worth starting to think now about how you might need to change your game plan.
How to Keep More of Your Profits
With the tax landscape looking rockier than ever, landlords need to get savvy if they want to keep their profits out of HRMC’s coffers.
Here are a few tricks to keep up your sleeve:
Don’t Pay a Penny More Than You Need To
The first rule of being tax-efficient? Claim back every single expense you’re entitled to. From mortgage interest and repairs to insurance, agent fees, and ground rent, there’s a whole host of costs you can knock off your tax bill.
Keep a tight grip on all your receipts and invoices (go digital if you can), and make sure you’re not letting any sneaky expenses slip through the net. Even small costs can really add up over the year.
Could a Limited Company Cut Your Tax Bill?
For some landlords, setting up a limited company to hold their rental properties can be a smart move.
Why? Because companies can pay lower Corporation Tax rates than Income Tax rates.
But before you rush off to Companies House, there are some downsides to weigh up. Mortgages can be pricier and harder to come by, and you’ll have a lot more paperwork and accounting to stay on top of.
Definitely get some expert advice to see if incorporating stacks up for you. Read our full guide to limited companies for landlords here.
Make the Most of Your Tax Breaks
Despite recent rule changes, there are still several ways landlords can reduce their overall tax liability, provided they understand what’s available and how to make use of it.
For example, landlords of furnished holiday lets (FHLs) can claim capital allowances on items such as furniture, white goods, and other fixtures, making this a significant benefit for those operating in that space.
For most residential landlords, replacement of domestic items relief is the appropriate route, allowing you to deduct the cost of replacing existing furnishings like beds, sofas, and white goods, but not the initial cost of furnishing a property.
Capital Gains Tax Relief for Furnished Holiday Lets
If you let out furnished holiday properties that meet specific criteria (regarding availability, actual letting, and intention), you may qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) when selling.
It reduces the Capital Gains Tax rate to 10%, subject to the lifetime limit. Standard residential buy-to-lets do not qualify for this relief.
Read our full guide to boosting rental profits here.
Let Double Point Simplify Your Property Taxes
At Double Point, we’re passionate about making property taxes as painless as possible for our clients.
Our team of experienced accountants specialise in working with landlords and property investors, so we know the ins and outs of the tax challenges you face.
We pride ourselves on providing jargon-free, personalised advice. Whether you’ve got a single rental property or a sprawling portfolio, we’ll take the time to understand your goals and build a tax strategy that works for you.
Here are just a few of the ways we can help:
- Ensuring you’re claiming every expense and allowance you’re entitled to
- Advising on the most tax-efficient structure for your property business
- Preparing and filing your Self Assessment tax returns with precision
- Getting you ready for Making Tax Digital with the right software and support
So why struggle with property taxes alone? Book a free, no-obligation consultation with our team today and discover how we can help you take control of your finances and achieve your property goals with confidence.
With Double Point, you can say goodbye to tax issues and hello to a brighter, more profitable future. Get in touch now and let’s start your journey to property tax success.
