Previously, buy-to-let landlords who sat in the higher-rate or additional-rate tax bands were hit with higher tax bills. Those who were nearing the limit of the basic-rate tax band also ended up paying more tax.

While the initial changes began in 2017, the landscape has continued to shift with new rules on Stamp duty, Capital Gains, and digital reporting.

What’s changed?

It used to be that, as a buy-to-let landlord, you were allowed to deduct the full amount of allowable expenses (mortgage interest payments often being the biggest) from your profits. You effectively only paid tax on the rental profits.

Allowable expenses for buy-to-let landlords include:

• Most repair and maintenance costs to the property.
• Letting agent and management fees.
• Landlord insurance (buildings/contents).
• Council tax or utilities (if paid by the landlord).

The restriction (section 24): The government changed the rules so you can no longer deduct mortgage interest and other finance costs from your rental income. Instead, you get a basic-rate (20%) tax credit applied against your final tax liability. This move was staggered over four years and has been fully in effect since April 2020. 

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Does it affect all landlords?

Landlords in the basic-rate tax band may see little or no change in their tax bill, but reporting gross rental income could push total income into the higher-rate tax band, potentially affecting your eligibility for child benefits or other means-tested allowances.

Higher-rate landlords will generally pay more tax than under the pre-2017 rules because mortgage interest is no longer deductible.

These rules apply only to individual landlords of residential properties. They do not apply to:

• Limited Companies (which still deduct interest as an expense for Corporation Tax).
• Commercial properties.

Furnished Holiday Lets (FHLs):

From April 2025, FHLs lost their special tax advantages and are now taxed like standard residential buy-to-lets under Section 24 restrictions.

Other recent tax updates (2024-2026)

Stamp Duty (SDLT) increases

As of 31 October 2024, the Stamp Duty surcharge for second homes and buy-to-let properties increased from 3% to 5% on top of standard SDLT rates.

From 1 April 2025, the nil-rate band for residential property reverted to £125,000, meaning SDLT is payable from a lower threshold.

Capital Gains Tax (CGT)

For disposals of residential property, the rates are now:

• 18% for basic-rate taxpayers.
• 24% for higher-rate taxpayers. 
• The annual exempt amount for Capital Gains Tax is £3,000 for individuals.

Making Tax Digital (MTD)

Under the Making Tax Digital for Income Tax Self Assessment rules landlords will soon be required to keep digital records and send quarterly updates to HMRC:

• April 2026: Mandatory for those with rental or self-employed income over £50,000.
• April 2027: Threshold lowers to £30,000.

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Would I be better off setting up a limited company?

Without knowing your individual circumstances, we can't advise on whether a limited company structure is best for you. However, if you have more than one property and you don’t need to regularly withdraw the profits generated, it could well be more tax-efficient to run them through a limited company.

For more advice, get in touch with us today.