Property tax rules are shifting again, and landlords need to understand how these updates will shape investment decisions, rental profits and long-term planning. From mortgage interest relief changes to increased compliance and reduced allowances, the landscape is tightening. Here’s a clear breakdown of what’s changing and how it affects landlords across the UK.

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Mortgage Interest Relief Increases to 22 Percent

Landlords will see a modest improvement in 2027 when the basic-rate tax credit on mortgage interest rises from 20 percent to 22%.

This does not return us to the pre–Section 24 position, but it does reduce the tax bill slightly for landlords paying higher-rate tax. Anyone with large mortgages will feel the benefit most, especially as interest rates remain unpredictable.

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More Landlords Moving Into Higher Tax Bands

With thresholds not rising in line with inflation, more landlords will drift into the 42 percent or even 47 percent bands. As rental income increases with rising rents, tax liabilities increase too.

This pushes landlords to consider:
• whether joint ownership with a lower-rate spouse is more efficient
• whether to restructure into a partnership
• whether incorporation into a limited company is more beneficial long term

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Making Tax Digital Brings Mandatory Quarterly Reporting

MTD becomes fully enforced for landlords from April 2026, but the practical impact hits from 2027 when penalties start to apply.

Landlords will be required to:
• keep digital records
• submit quarterly income updates
• complete an end-of-year finalisation

Those still using paper or basic spreadsheets will find the workload heavier unless they move to proper cloud accounting software.

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Lower Capital Gains Tax Allowance Reduces Profits on Sale

The CGT annual exemption is now just £3,000. This means nearly every property sale will attract tax unless it qualifies for private residence relief.

With higher-rate CGT on residential property at 24 percent, landlords selling even modest properties will feel the squeeze. This affects exit strategies, incorporation plans and long-term portfolio design.

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Stricter Enforcement of Undeclared Rental Income

HMRC’s expanded data-matching powers mean it now receives information from:
• Land Registry
• Airbnb and other short-let platforms
• Councils and utility providers
• Mortgage lenders

This makes undeclared rental income far easier for HMRC to detect.
Landlords who have missed returns can still use the Let Property Campaign to disclose voluntarily and minimise penalties.

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Possible Changes to Allowable Expenses

There is ongoing consultation about simplifying the rules for:
• repairs vs improvements
• renewal costs
•energy-efficiency upgrades

Future changes may favour landlords investing in EPC improvements, but for now, the existing rules apply.

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Company Structures Remain Attractive — With Caveats

Limited companies remain popular for landlords wanting full mortgage interest deductibility and a 19 percent Corporation Tax rate where profits are modest.

However, landlords must consider:
• SDLT on transfers into the company
• CGT on incorporation
• ongoing filing and running costs

The structure works best for landlords planning long-term growth rather than small, single-property portfolios.

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Conclusion

Property tax changes continue to tighten margins and increase the need for proper planning. Whether it’s adjusting to higher tax bands, preparing for quarterly reporting under MTD, or reviewing ownership structures to stay tax-efficient, landlords need to make informed decisions early. With the right strategy, you can stay compliant, protect profits and build a stronger portfolio despite the shifting rules.

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Final Thought

The landscape is changing, but well-prepared landlords will adapt. Staying informed and seeking timely advice is the simplest way to stay ahead of these tax changes and keep your investments performing well.