The 2025–26 tax year is a pivotal one for UK landlords. From a steeper Stamp Duty Land Tax (SDLT) surcharge to the end of the Furnished Holiday Let (FHL) regime, plus the looming rollout of Making Tax Digital (MTD), the landscape has shifted significantly. What’s more, the Renters’ Rights Bill promises to bring a raft of legislative changes.
Whether you own one rental property or manage a portfolio, these changes can have a direct impact on your profits. Staying informed and planning is the key to keeping more of your hard-earned income. Let’s break down each change in detail and explore practical tips to help you stay compliant while reducing your tax bill.
Prepare for Making Tax Digital (MTD) for Income Tax
The government’s Making Tax Digital programme is moving full steam ahead. From 6 April 2026, landlords earning £50,000 or more in gross rental income must:
- Keep digital accounting records.
- Send quarterly income and expense updates to HMRC through MTD-compatible software.
- File a final End of Period Statement after the tax year.
Landlords earning £30,000 will be required to join MTD from April 2027. Those below £30,000 are expected to join in from April 2028.
At Myers Clark, we are already versed in MTD and have started the transition process with our clients. If you’re the sort of person who likes to get organised early and avoid last-minute stress, take some positive steps now. Visit our website and download our free guide. We will then be in touch.
Watch Out for Income Tax Threshold Freezes
The UK’s personal allowance (£12,570) and higher-rate threshold (£50,270) are frozen until at least 2028–29.
Even if your rental income increases modestly, more of it may be taxed at higher rates due to inflation, which pushes wages and rents up, this is known as “fiscal drag.”
Track your combined income (salary, rental profits, and other sources) because this will give you an indication of your tax rates.
If your income is close to the higher-rate threshold, you may be able to stay in the basic-rate band by making pension contributions or splitting ownership with a lower-earning partner.
Here’s a short guide on various ways to plan for your tax.
Understand the New Stamp Duty Land Tax (SDLT) Surcharge
From 1 April 2025, the additional SDLT rate for second homes and buy-to-let properties has increased from 3% to 5% across all property value bands.
Let’s use an example, if you buy a £300,000 rental property:
- Standard SDLT (without surcharge) = around £5,000.
- Plus 5% surcharge = an additional £15,000.
- Total SDLT bill = £20,000.
Previously, that surcharge would have been about £9,000, so this change represents a significant cost increase for landlords purchasing new properties.
Remember, if you’re considering a purchase, factor SDLT into your budget early to avoid unexpected cash flow surprises.
In some cases, buying in a limited company may help with tax efficiency, but company purchases also attract a surcharge, so weigh the long-term benefits against the upfront costs.
Furnished Holiday Let (FHL) Relief Abolished
The popular FHL tax regime ended on 6 April 2025. Previously, qualifying holiday lets were treated more like a business than an investment property, allowing for:
- Full mortgage interest deduction.
- Capital allowances for furniture, fittings, and equipment.
- Certain pension contributions are based on rental profits.
Now, these properties are taxed like any other residential rental, meaning:
- Mortgage interest relief is restricted to a 20% tax credit.
- No more capital allowances because furnishings can only be deducted under the “replacement of domestic items” rule.
Claim Every Allowable Expense
To reduce your taxable profits, claim all legitimate expenses. These include:
- Repairs and maintenance (e.g., fixing a boiler, repainting walls).
- Letting agent and property management fees.
- Landlord insurance.
- Council tax and utilities you pay as the landlord.
- Replacement of domestic items like carpets or white goods.
Improvements (like adding an extension or upgrading to premium fixtures) aren’t deductible from rental income but can reduce CGT when you sell.
Here’s a great blog which gives more information on the difference between repairs and improvements.
Our tax guide for Landlords is another great resource to check if you are claiming everything you can. So download our free guide.
Save Tax Through Partner Ownership or via a Company.
If you own property solely, take a moment to reconsider whether this is the best arrangement for you. Is your partner in a lower tax bracket than you? If so, why aren’t you both co-owners?
Have you considered owning the property through a limited company? Additionally, is it even possible to transfer ownership to a limited company? And if you decide to do this, what are the tax consequences?
Lots of questions to think about to optimise your tax position. Everyone’s situation is unique, and numerous factors must be considered. Being a landlord is not easy, nor is it a quick way to get rich. These days, it’s one that requires a lot of thought, and decisions should be made with careful consideration.
Final thoughts
To be a successful landlord today demands considerable effort, particularly if you have investment properties as part of your overall objectives. It’s crucial to maximise the potential of your investments.
Change is inevitable, and businesses tend to go through cycles; therefore, it’s essential to engage in long-term planning. Talking with a trusted advisor who understands your goals can also be very helpful.
Please call us if you want to discuss your property portfolio in further detail. If you are not yet working with us, have a look at how we work with landlords.