Buy-to-Let
Buy-to-Let Tax Changes 2026: What Landlords Need to Know
Landlord tax keeps tightening. Property income tax rates rise by 2% from April 2027, dividend tax rose in April 2026, Making Tax Digital started for larger landlords, and the holiday let regime has gone. Here is what has changed and what it means for your mortgage and structure.
Written and reviewed by Davi Thakar, CeMAP qualified mortgage and protection adviser Updated
The biggest buy-to-let tax change is that property income tax rates rise to 22%, 42% and 47% from April 2027, with mortgage interest relief given at 22%. Alongside that, dividend tax went up in April 2026 and Making Tax Digital started for landlords with income over £50,000.
None of these changes stops a well-run rental from working. They do squeeze after-tax profit, especially for higher-rate landlords with large mortgages, and they change the sums on owning personally versus through a company.
This guide sets out what has changed, who it affects and what it means for your mortgage. For the full picture on borrowing, see our complete buy-to-let mortgage guide.
What are the buy-to-let tax changes for 2026?
Most of the change lands on individual landlords from April 2027. Property income will be taxed at its own rates, 2 percentage points higher than now, and finance cost relief rises to 22%. Company landlords already pay more to take money out after April 2026’s dividend rise. Making Tax Digital now applies to landlords with qualifying income over £50,000.
| Change | When | Who it affects |
|---|---|---|
| Property income tax rates rise to 22%, 42% and 47% | April 2027 | Individual landlords in England, Wales and Northern Ireland |
| Finance cost relief given at 22% | April 2027 | Individual landlords with mortgages |
| Dividend tax up 2% for basic and higher rate | April 2026 | Company landlords taking dividends |
| Making Tax Digital for Income Tax | April 2026, over £50,000 | Landlords and sole traders, with lower thresholds to follow |
| Renters’ Rights Act tenancy reforms | 1 May 2026 | Private landlords in England |
| Furnished holiday let regime abolished | April 2025 | Holiday let owners |
| Stamp Duty surcharge 5% | Since 31 October 2024 | Buyers of additional homes in England and Northern Ireland |
How will rental profit be taxed from April 2027?
Rental profit is added to your other income. From April 2027, property income will have its own rates, each 2 percentage points higher than now: 22% basic, 42% higher and 47% additional. The government set these out in its policy paper on changes to tax rates for property, savings and dividend income. Allowances and reliefs will be set against other income first, leaving property income taxed last.
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A higher-rate taxpayer makes £10,000 rental profit before mortgage interest, and pays £6,000 interest. At 40%, tax is £4,000, less a 20% credit on the interest of £1,200, so £2,800. From April 2027, at 42% with a 22% credit, tax is £4,200 less £1,320, so £2,880. Their after-tax profit falls from £1,200 to £1,120.
Can landlords still claim mortgage interest?
Individual landlords cannot deduct mortgage interest from rent. They get a tax credit at the basic rate instead: 20% now, 22% from April 2027. GOV.UK shows how the credit works in its guide to finance cost relief for residential landlords. Higher-rate landlords with large mortgages are hit hardest, and some can pay tax even when the property makes little or no real profit.
How are limited company landlords affected?
Companies deduct mortgage interest as a cost and pay corporation tax at 19% on profits up to £50,000, rising to 25% above £250,000, with marginal relief between. See GOV.UK’s Corporation Tax rates. Taking money out is taxed again, though. From April 2026, dividend tax rose to 10.75% for basic-rate and 35.75% for higher-rate taxpayers. The additional rate stayed at 39.35%.
That narrows the advantage of a company for landlords who need the income personally. It matters less for landlords who leave profit in the company to fund more purchases. Read our limited company buy-to-let guide.
What Stamp Duty do landlords pay?
In England and Northern Ireland, buying an additional home usually means paying 5% above the standard rates on the whole price. On a £250,000 purchase that is £15,000, compared with £2,500 at standard rates. Companies pay the higher rates on any residential purchase. GOV.UK covers the rules for buying an additional residential property. Scotland and Wales have their own surcharges. Use our Stamp Duty calculator.
What Capital Gains Tax applies when you sell?
Gains on residential property are taxed at 18% for basic-rate taxpayers and 24% above that. The annual exempt amount is £3,000. You must report the sale and pay the tax within 60 days of completion. Our Capital Gains Tax guide explains how the gain is worked out.
Do landlords have to use Making Tax Digital?
From April 2026, landlords and sole traders with qualifying income from property and self-employment over £50,000 must keep digital records and send quarterly updates to HMRC. GOV.UK’s guide to when you need to use Making Tax Digital shows the threshold falls to £30,000 from April 2027 and £20,000 from April 2028. Speak to your accountant about software well before your start date.
What happened to holiday let tax rules?
The furnished holiday let regime ended in April 2025. Holiday lets are now taxed like other rental property, losing full mortgage interest relief, capital allowances on new spending and some Capital Gains Tax reliefs. See our holiday let mortgage guide.
How does the Renters’ Rights Act affect landlords?
It is not a tax, but it is a cost. From 1 May 2026, most private tenancies in England became periodic, section 21 evictions ended, and rent rises follow a formal annual process. GOV.UK has a guide to the Renters’ Rights Act. Budget for compliance and possibly longer possession routes.
Which situations do lenders see most?
These are illustrative situations, not Option Finance client outcomes.
Higher-rate landlord with big mortgages
Rent covers the lender’s test, but tax on the full rent leaves very little after interest. Remortgaging needs a real cash-flow check.
Pass the stress test, still check the taxThinking about incorporating
You want to move personal properties into a company. The company has to buy them, which brings Stamp Duty, Capital Gains Tax and new mortgages.
Get the tax advice before the mortgageBuying the next one in a company
You keep existing properties personally and buy new ones through an SPV. Lenders treat this as normal.
Many landlords run both structuresHoliday let owner after April 2025
Your holiday let lost its special tax treatment. Some owners switch to long-term letting and need a standard buy-to-let mortgage.
Check the rent works on a long letWhat does this mean for your mortgage?
- Lower after-tax profit means you need more headroom. Do not rely on the lender’s rental test alone, which looks at the rent, not your tax bill.
- Restructuring into a company usually means selling the property to it, with Stamp Duty and possibly Capital Gains Tax, plus new mortgages. It is rarely worth it without specialist advice.
- Remortgaging while tax rises can squeeze cash flow. Look at the payment after tax, not just the rate. See our buy-to-let remortgage guide.
- Interest-only or repayment choices affect cash flow and tax. See interest-only buy-to-let.
Frequently asked questions
What are the new tax rates for landlords?
From April 2027, property income in England, Wales and Northern Ireland will be taxed at 22%, 42% and 47%, and finance cost relief will be given at 22%.
Can landlords deduct mortgage interest?
Individual landlords cannot. They receive a basic-rate tax credit instead. Limited companies can deduct it as a business cost.
Is it better to own buy-to-let in a limited company now?
It depends. Companies deduct mortgage interest, but dividend tax rose in April 2026 and moving existing properties usually triggers Stamp Duty and Capital Gains Tax. Take advice.
What is the Stamp Duty surcharge on buy-to-let?
In England and Northern Ireland, 5% above the standard rates on the whole price for additional homes.
When does Making Tax Digital apply to landlords?
From April 2026 if your qualifying property and self-employment income is over £50,000, falling to £30,000 from April 2027 and £20,000 from April 2028.
What happened to furnished holiday let tax relief?
The regime was abolished in April 2025. Holiday lets are now taxed like other rental property.
Do lenders take my tax bill into account?
Most buy-to-let lenders test the rent against the mortgage payment at a stress rate. Some vary the cover they need by your tax band, but none replaces your own after-tax cash-flow check.
How long do I have to pay Capital Gains Tax on a rental sale?
You must report the sale and pay any tax due within 60 days of completion.
Speak to Option Finance about your buy-to-let plans
Once you have tax advice, we will tell you straight what lenders would offer personally or through a company, and whether a remortgage still stacks up after tax.
Book a free initial consultation using the enquiry form below. See our buy-to-let mortgage advice and our guide to portfolio landlord mortgages.
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Written and reviewed by Davi Thakar
Director & Senior Mortgage Broker
CeMAP Qualified Mortgage and Protection Adviser
Davi founded Option Finance with a vision to deliver transparent mortgage advice from a wide panel of lenders. With over 10 years in financial services, he specialises in complex cases including adverse credit, self-employed borrowers with limited trading history, and large buy-to-let portfolios. He works directly on complex cases and explains each option clearly.
Meet Davi Thakar
