Last updated: June 2026.
The tax changes that have reshaped buy-to-let
Five major changes have stacked up over the last decade. Together they explain why buy-to-let economics for individual investors have deteriorated so dramatically.
| Change | When | Impact on individual landlords |
|---|---|---|
| Section 24 (mortgage interest relief restriction) | Phased 2017-2020 | Mortgage interest no longer deductible from rental income; replaced by 20% basic-rate tax credit |
| 3% Stamp Duty surcharge on additional properties | April 2016 | £10,000+ added to typical BTL purchase cost |
| CGT rates rose to 18%/24% | 30 October 2024 | Higher tax on disposal; 60-day reporting window |
| Buy-to-let mortgage rates | Risen since 2022 | BTL mortgage rates typically 0.5-1% above residential |
| BR cap at £1m | April 2026 | Property already excluded; just confirms BTL not in scope |
Section 24, the change that did most damage
Until 2017, individual landlords could deduct mortgage interest from rental income before calculating tax. Section 24 phased this out between 2017 and 2020. The replacement: a basic-rate (20%) tax credit, applied after tax is calculated.
The practical effect for a higher-rate taxpayer: mortgage interest effectively gets 20% relief instead of 40%. For an additional-rate taxpayer, 20% instead of 45%.
Worked example for a higher-rate (40%) taxpayer with £20,000 rent and £15,000 mortgage interest:
| Pre-2017 | Post-2020 | |
|---|---|---|
| Rental income | £20,000 | £20,000 |
| Mortgage interest deducted | (£15,000) | (£0) |
| Taxable profit | £5,000 | £20,000 |
| Tax at 40% | £2,000 | £8,000 |
| 20% credit on mortgage interest | - | (£3,000) |
| Net tax | £2,000 | £5,000 |
£3,000 more tax annually on the same income. Over 10 years of ownership, that's £30,000, often enough to wipe out the gross rental yield advantage that originally made the property attractive.
Individual ownership vs limited company
The other side of the Section 24 story: limited companies aren't affected by it. A property held in a limited company can still deduct mortgage interest fully from corporation tax. This has driven a major shift toward incorporated BTL portfolios.
| Factor | Individual ownership | Limited company |
|---|---|---|
| Mortgage interest treatment | 20% credit only (post-S24) | Fully deductible from CT |
| Tax rate on profits | 20%/40%/45% income tax | 25% corporation tax |
| Extraction of income | Already in your name | Dividend or salary, extra tax layer |
| Mortgage rates | Standard BTL rates | Higher BTL rates for limited companies |
| Set-up costs | None | Solicitor + accountant setup costs |
| Stamp Duty (transferring existing) | - | Full SDLT payable; major friction |
| CGT on disposal | 18%/24% | Held inside company; gains taxed at CT, then dividend tax on extraction |
| Best suited to | 1 property; basic-rate taxpayers; long holds | Portfolios; higher-rate taxpayers; new acquisitions |
For new acquisitions by higher-rate taxpayers with portfolio intentions, limited company is almost always the better structure. For existing personally-owned properties, transferring to a company triggers full Stamp Duty and CGT, usually not worth the cost unless the portfolio is large enough to justify the friction.
The case for buy-to-let in 2026
The case still exists but is narrower than it was. Buy-to-let can make sense if:
- You're a basic-rate taxpayer (Section 24 doesn't change your tax position)
- You're buying with cash or low leverage (Section 24 affects mortgaged BTL most)
- You're building a limited company portfolio (avoids Section 24)
- You have specific local knowledge that lets you identify under-priced assets
- You want diversification away from financial assets
- You're prepared to handle the management overhead (or pay for it)
The case against
- You're a higher-rate or additional-rate taxpayer holding individually
- You're highly leveraged
- You have substantial equity in existing BTL with growing CGT exposure
- You're looking for passive income (rental management is rarely truly passive)
- You're comparing to equity returns inside an ISA wrapper
Selling vs holding existing BTL
If you have existing buy-to-let properties, the case for selling vs holding turns on several factors:
Reasons to consider selling
- CGT exposure that grows each year (and may increase if rates rise further)
- Time-consuming management you don't enjoy
- EPC requirements requiring upgrade investment
- Renters' Rights Bill implementation requiring process changes
- Better risk-adjusted returns available elsewhere (especially ISA-wrapped equities)
- Concentration risk (too much of your wealth in property)
Reasons to consider holding
- Strong rental yield in your specific area
- Low mortgage interest cost (e.g. you've cleared the mortgage)
- The property forms part of your retirement income plan
- Sentimental or family value
- Anticipating CGT rate increases that you'd accelerate by selling now
A spreadsheet that compares net income after tax, factors in CGT exposure, and runs against alternative investments is usually the right starting point. See cash flow planning.
Frequently asked questions
Should I buy-to-let in my own name or through a limited company?
It depends on your tax band and intentions. Higher and additional-rate taxpayers usually pay less tax through a limited company because mortgage interest is fully deductible from corporation tax (which doesn't apply to individuals due to Section 24). But limited company mortgage rates are higher, set-up costs apply, and extracting income from the company adds another layer of tax. For a single property held for income, individual ownership is often still simpler. For a portfolio of 3+ properties, limited company structures typically win.
Has the abolition of the non-dom regime affected buy-to-let?
Indirectly. Some overseas investors who used UK property as a tax-efficient asset have wound down their UK holdings. Combined with the wider exodus of HNW residents, this has softened demand in some high-end markets while affecting the lettings market less.
What's happening with the buy-to-let market in 2026?
Conditions are tighter than they've been in decades for individual landlords. The number of new BTL mortgages has fallen significantly since 2017. Rental yields in many areas are at or below the cost of mortgage interest plus tax. Larger portfolio landlords (with limited company structures) and institutional investors have taken increasing market share. The 'casual' BTL investor era is largely over.
Will buy-to-let qualify for Business Relief from April 2026?
No. Property letting has never qualified for Business Relief because it's classed as 'making or holding investments'. The April 2026 changes to BR don't change this. Property held in a trading company (e.g. a property development business) can qualify, but pure buy-to-let does not.
Should I sell my existing buy-to-let properties?
Not necessarily, but worth reviewing. The case for keeping depends on: your specific yield after tax, your CGT exposure on sale, whether the property fits your retirement income plan, and alternatives for the capital. The case for selling: high CGT exposure that grows each year, time-consuming management, regulatory changes (EPC requirements, renters' rights legislation), and better risk-adjusted returns available elsewhere.