Letting property has always come with responsibilities, but tax is the one that has changed most in recent years. Mortgage interest relief was restricted, Stamp Duty on additional property went up, and in April 2026 quarterly reporting to HMRC began for landlords whose qualifying income exceeds £50,000.
The result is that plenty of landlords are paying more tax on the same rental income they earned five years ago. Here’s where the rules stand now, what’s still to come, and what you can do about it.
The Changes That Reshaped Landlord Tax
Several reforms have landed over the past few years, and together they explain why margins have tightened.
Section 24 and Mortgage Interest
Section 24 is the change that hurt most. Before it, landlords deducted mortgage interest from rental income before working out their taxable profit. It was phased in from April 2017 and has been fully in force since April 2020.
Now, individual residential landlords generally cannot deduct mortgage interest and other restricted finance costs when calculating taxable property profit. Instead you receive a basic-rate tax reduction, generally worth up to 20% of your qualifying finance costs, subject to statutory limits based on your property profits and total income.
Because profit is calculated before interest, and relief is then given separately at the basic rate, higher-rate landlords can end up worse off than they would have been under the old rules. Interest on commercial property is treated differently, and companies are outside the restriction entirely, which is why so many landlords have looked at incorporating.
Stamp Duty on Additional Property
The surcharge on second homes and buy-to-let has climbed. It was 3% from 2016, and rose to 5% on 31 October 2024. Combined with the standard rates, the Stamp Duty bands for an additional property purchase in England and Northern Ireland now look like this:
| Portion of purchase price | Rate |
|---|---|
| Up to £125,000 | 5% |
| £125,001 to £250,000 | 7% |
| £250,001 to £925,000 | 10% |
| £925,001 to £1.5m | 15% |
| Above £1.5m | 17% |
Scotland and Wales run their own transaction taxes at different rates. On a £300,000 buy-to-let in England, that works out at £20,000 before you’ve collected a penny in rent, which is enough to make anyone recalculate their yield.
Capital Gains Tax on Selling Up
Selling isn’t the clean exit it once was. Residential property gains are taxed at 18% for gains within the basic rate band and 24% above it. The bigger squeeze is the annual exempt amount, which has fallen to just £3,000, down from £12,300 in 2022/23. Far more of your gain is now taxable.
Two things catch landlords out. Gains are stacked on top of your income, so a large gain can push much of itself into the 24% band. And any Capital Gains Tax due on most UK residential property sales must be reported and paid within 60 days of completion, not at the next Self Assessment deadline. Miss that and you may face penalties and interest.
Lettings relief still exists, but it was heavily restricted in April 2020. It now only applies where you occupied the property at the same time as your tenant, so most landlords won’t qualify.
Making Tax Digital Is Now Live
This is the change landlords are dealing with right now. Making Tax Digital for Income Tax began on 6 April 2026 for individual landlords and sole traders whose qualifying income – gross property and self-employment income combined, before expenses – exceeded £50,000. Partnerships and some other categories are not yet in scope.
If you’re caught, you must keep digital records, send HMRC quarterly updates through compatible software, and still submit your annual tax return using that software. The quarterly updates are in addition to the yearly process, not a replacement for it. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028, so more landlords will be drawn in over the next two years.
There’s some leniency in year one: HMRC won’t apply late-filing penalty points for quarterly updates during 2026/27 for those mandated from April 2026, though penalties for the annual return and for late payment still apply. You can check whether Making Tax Digital applies to you on Gov.uk.
The practical effect is that record-keeping has to be continuous rather than a January scramble. That’s more work, but keeping records as you go does make it easier to identify and document the expenses you’re entitled to claim.
The Renters’ Rights Act
Tax isn’t the only pressure. The Renters’ Rights Act 2025 reforms the private rented sector in England, and it is being brought in over several phases. The first main phase took effect on 1 May 2026, ending new Section 21 no-fault notices, moving most assured private tenancies to a periodic structure, revising the rules on rent increases and giving tenants the right to request a pet.
Further measures, including the Decent Homes Standard for the private rented sector and the extension of Awaab’s Law, come later in the rollout. None of this is tax, but it affects the numbers: revised possession grounds, notice requirements and compliance duties all feed into running costs and the time it takes to recover a property, which is worth building into any yield calculation.
What’s Coming in 2027
The most significant change on the horizon is a straightforward increase, and it’s already legislated in the Finance Act 2026. From April 2027, property income in England, Wales and Northern Ireland will be taxed at its own rates: 22% at the basic rate, 42% at the higher rate and 47% at the additional rate. Finance-cost relief will be given at 22%. Scotland has its own income tax framework and sits outside these rates.
For landlords in England, Wales and Northern Ireland, that’s two percentage points above the equivalent income tax bands, applied specifically to rental profits. It makes every legitimate deduction and every structural decision worth a little more than it was before.
How to Keep More of Your Profit
The rules have tightened, but the levers haven’t disappeared. A few are worth working through properly.
- Claim your allowable expenses. Agent fees, insurance, repairs, ground rent and service charges can all be deducted, provided they’re incurred wholly and exclusively for the property business. Repairs qualify but genuine improvements don’t, and travel only counts where the journey is solely for the lettings.
- Use Replacement of Domestic Items Relief. Replace a bed, sofa, fridge or washing machine in a let property and you can claim the cost, less anything you receive for the old item. It covers a reasonable modern equivalent rather than an upgrade, and it doesn’t cover the initial furnishing.
- Consider the split with a lower-rate spouse. Where spouses own jointly, HMRC taxes the income 50:50 by default. Being taxed on a different split requires genuinely unequal beneficial ownership, matching entitlement to the income, and a Form 17 declaration within 60 days. It can’t be done on paper alone, and mortgage and Stamp Duty consequences need checking.
- Carry losses forward. Property business losses are automatically set against future profits of the same property business, with no special claim needed. They are usually lost if the business ceases, though they may survive where letting restarts within three years and it’s factually the same business.
Incorporation is the bigger structural question. A company is outside the individual residential finance-cost restriction and pays corporation tax rather than income tax, which looks increasingly attractive with the 2027 rates coming.
But moving existing properties into a company can trigger Capital Gains Tax and Stamp Duty, though certain reliefs may apply in limited circumstances, and taking profits out as dividends costs more since April 2026. Our guide on whether landlords should set up a limited company works through the numbers.
One thing to be aware of if you have a holiday let: the furnished holiday lettings regime was abolished in April 2025. New expenditure on furnishings no longer attracts capital allowances under the old FHL rules, and Business Asset Disposal Relief is no longer available simply because a property once qualified as an FHL.
Writing-down allowances can still continue on expenditure already in a capital allowances pool before abolition, but otherwise your holiday let is now taxed like any other rental property.
How Double Point Can Help
Landlord tax has become a moving target, and the right answer depends on your borrowing, your tax band, and what you plan to do with the portfolio.
At Double Point, our chartered accountants work with landlords and property investors on exactly this. We’ll make sure you’re claiming everything you’re entitled to, get you set up properly for Making Tax Digital, handle your tax return, and advise on whether your current structure still makes sense as part of a wider tax planning approach.
To find out where you stand and what you could be saving, book a consultation with us today.