How Will UK Landlord Rental Income Tax Be Changing?

UK landlords are facing major changes to rental income tax, reporting requirements and overall property costs over the next few years. The effects to the rental market have now caused many property owners to begin to reassess whether continuing to let property still the right option, or is it time to sell?

In this guide, we explain how landlord income rental tax is changing, what it means for buy-to-let owners, and why some landlords are now choosing to sell their rental property.

What is landlord rental income tax?

Essentially, in the UK, landlord’s are required to pay rental income tax is on the profits made from letting residential property. Tax rates of 20%, 40%, or 45% are based on total earnings on a rental property, minus allowable expenses. In November 2025, the Autumn Budget announced that, from April 2027, these rates will increase by 2% for property income.

Mortgage interest relief restrictions

Individual landlords can no longer deduct mortgage interest from rental income. Instead, they receive a 20% basic-rate tax credit. For higher-rate and additional-rate taxpayers, this has already significantly reduced net rental income, even where rents have increased.

Are rental income tax rates increasing?

Although income tax rates themselves have not increased, many landlords are paying more tax due to frozen income tax thresholds. The government has confirmed that thresholds will remain frozen until at least April 2028, meaning rental income that rises in line with inflation can push landlords into higher tax bands without any real increase in purchasing power. This process, often referred to as fiscal drag, steadily increases the effective tax burden on landlords over time.

As rents rise to cover higher costs, more of that income becomes taxable at higher rates. For landlords with modest margins, this can significantly reduce the net return from holding rental property and make long-term ownership less attractive.

Making Tax Digital (MTD) for landlords

One of the biggest upcoming changes for landlords is Making Tax Digital for Income Tax. This is set to take effect from April 2026 for landlords with gross rental income over £50,000, but by April 2027 this threshold will significantly reduce to £30,000.

Making Tax Digital will require landlords to keep digital accounting records and submit quarterly income and expense updates to HMRC digitally. While MTD doesn’t increase tax directly, the ongoing costs, admin time, and software fees, will add up, particularly for landlords with multiple properties.

Rising compliance and regulatory costs for rental properties

Beyond tax, landlords are also facing growing regulatory compliance. Over recent years, requirements around energy efficiency, safety certification and tenant protections have grown significantly. Properties must meet minimum Energy Performance Certificate standards, maintain valid gas and electrical safety reports and comply with Right to Rent checks and deposit protection rules. In many areas, additional licensing schemes impose further costs and administrative oversight.

Proposed reforms to tenancy law may also:

• Reduce landlord flexibility
• Increase possession times
• Raise legal risk and costs

Council Tax and Capital Gains Tax

Though there is no confirmed national “mansion tax”, council tax premiums already apply to long-term empty homes and local authorities will continue to explore higher charges for certain property categories. For landlords holding high-value or under-used properties, local authority charges may continue to rise, adding to overall ownership costs.

When selling a rental property, landlords must also consider Capital Gains Tax. Residential property gains are taxed at higher rates than many other assets, and the annual CGT allowance has been reduced in recent years. There has also been ongoing discussion about potential future reforms, creating uncertainty for landlords planning long-term exit strategies.

Why more landlords are choosing to sell their tenanted properties

With higher effective taxation, increased regulation, and rising admin, it’s no surprise that many landlords are now looking to exit the buy-to-let market. Selling a tenanted property sooner rather than later can provide a range of financial, administrative, and strategic advantages for UK landlords, especially for those who are approaching retirement, managing multiple properties or experiencing decreasing rental margins.

Benefits of selling rental property for landlords

• Lock in current market value: Selling before market fluctuations or economic uncertainty allows landlords to secure a guaranteed return on their investment.
• Reduce exposure to rising taxes and fiscal drag: With income tax thresholds frozen and mortgage interest relief restricted, selling early helps avoid years of increasing effective tax rates.
• Minimise administration and compliance costs: Early sale allows landlords to avoid ongoing obligations such as Making Tax Digital, safety and energy regulations, and local licensing schemes.
• Gain certainty against future policy changes: Exiting now reduces risk from potential tenancy law reforms, environmental standards, or other regulatory changes that could increase costs or limit flexibility.
• Access capital liquidity: Selling frees up funds for alternative investments, debt reduction, or retirement planning instead of leaving money tied up in a property that may become less profitable.
• Benefit from fast, straightforward cash sales: Selling to a professional house buying company provides certainty, avoids estate agent fees and open market delays, and gives quick access to capital.

How can you sell your tenanted property?

Selling a rental property isn’t always straight forward and there can be a lot of challenges along the way, including navigating complex tenancy laws to dealing with tenant objections and viewing schedules. This can be particularly daunting and stressful, especially when dealing with the tax changes and rising costs.

We understand that, for many landlords, speed and certainty are priorities and with Sell House Fast, you can sell your tenanted property quickly, without the unnecessary hassle. We buy any house, in any condition, so you don’t need to worry about falling property prices, costly repair bills or financial struggles.