Buy to Let Tax Changes Explained: A Landlord’s Guide for 2025 and Beyond 

Navigating landlord tax changes in 2025 and 2026. 

The UK tax landscape for landlords has significantly changed in recent years. With mortgage interest tax relief having now been replaced by a tax credit system, and evolving rules surrounding income reporting, capital gains, and allowable expenses, landlords must now adapt their financial strategies to ensure they remain profitable and compliant with new regulations.  

In this updated 2025 guide, Chancellors outlines the key buy-to-let tax changes every landlord should understand, and how they affect your rental income, and what steps you can take to protect future investments.  

What is a Buy-to-Let? 

A Buy-to-Let (BTL) is when a property is purchased specifically to be rented out to tenants. For many landlords this is a medium to long term investment strategy, offering rental income and potential for capital growth. 

Taxation of rental income and property gains however has become increasingly complex and difficult for many to navigate. And as of 2025/2026 the new regulations could significantly impact the profitability of your buy-to-let portfolio.  

Summary of Key Buy-to-Let Tax Changes: A Timeline 

The End of Mortgage Interest Relief (Section 24) 

Prior to April 2017, landlords with a mortgage on their rental property could deduct 100% of mortgage interest from their rental income before calculating their tax bill. This significantly reduced taxable income and helped keep landlord tax bills low. 

Between 2017 and 2020, however, the UK government phased out this relief through Section 24 of the Finance Act.  

As of April 2020, landlords could no longer deduct mortgage interest from their rental income. Instead, all landlords receive a 20% tax credit on mortgage interest payments, regardless of income tax band. 

During each financial year between 2017 to 2020, the percentage of mortgage interest payments that you could deduct from your rental income decreased by 25%, while the percentage of those interest payments that qualify for the new tax credit increased by 25%. 

How the 20% Tax Credits Works in 2025 

As of 2025, landlords must pay tax on their full rental income, regardless of mortgage interest costs. However, you receive a 20% tax credit on eligible interest paid.  

For example: 

If a landlord earns £10,000 a year in rental income and pays £8,000 in mortgage interest payments, they will still be taxed on the full £10,000 (dependant on tax bracket), and not £2,000 as before. 

A total of £1,600 can however then be taken away from their tax bill due to the 20% Mortgage Interest Relief. (20% of £8,000), deducted from the tax bill. 

This is a system that has been in place since April 2020 and remains unchanged as of 2025/26. 

Buy-to-Let Tax Implications in 2025 & 2026 

We’re halfway through the year currently, though at Chancellors we understand there are still challenges for many landlords and property investors. As the market landscape becomes increasingly complicated and with the government’s initiative to make all tax returns digital, these number of proposed changes will certainly impact profitability, portfolio planning, and compliance.  

1. Capital Gains Tax (CGT) Increases – Now in Effect

From April 2025, updated Capital Gains Tax rates are in effect for residential property sales: 

• Basic rate taxpayers now pay 18% (up from 10%) 

• Higher rate taxpayers now pay 24% (up from 20%) 

This change increases the tax liability when selling a buy-to-let property, particularly for higher-rate landlords with significant capital appreciation. 

Chancellor’s Tip: If you’re considering restructuring your portfolio, factor in these CGT changes early. Timing the disposal of underperforming properties and offsetting gains with allowable losses can help minimise tax exposure. 

2. Stamp Duty Land Tax (SDLT) Changes

Two key SDLT changes took effect in late 2024 and early 2025: 

• Additional SDLT surcharge for second properties and company-owned purchases increased from 3% to 5% 

• Stamp Duty tax-free threshold was reduced from £250,000 to £125,000, reintroducing 2% SDLT between £125,000 and £250,000 

3. Making Tax Digital (MTD) for Income Tax – Starts April 2026

From 6 April 2026, landlords earning £50,000+ per year in rental income will be required to: 

• Keep digital records 

• Submit quarterly income and expenditure reports to HMRC using MTD-compliant software 

• Submit a fifth annual end-of-year statement 

Landlords earning between £30,000–£50,000 will follow from April 2027. 

The existing annual Self Assessment system will no longer be sufficient. MTD aims to increase reporting accuracy, but it also increases admin burden, especially for those managing multiple tenancies. 

Exemptions are available however on a case-by-case basis but must be applied for via HMRC and usually require strong justification (e.g. age, disability, or remote location with limited digital access). 

Allowable Expenses in 2025 for Buy-to-Let Landlords 

This isn’t all doom and gloom though. While mortgage interest is no longer deductible, landlords can still deduct the following: 

• Letting agent fees 

• Property maintenance and repairs (but not improvements) 

• Insurance (landlords’ building and contents) 

• Ground rent and service charges 

• Council tax and utilities (if paid by the landlord) 

• Legal, accounting and professional fees 

Keeping accurate and detailed records is vital to support any of these claims. 

Should You Own Buy-to-Let Property as a Limited Company in 2025? 

Some landlords have turned to limited company ownership to reduce their personal tax liability.  

If you do invest through a limited company, any profit made will be liable to corporation tax, which in 2025 and 2026 will be up to 19% on any profits made between £50,000 and £250,000. Anything above this level will see a 25% tax. 

However, there are some drawbacks with setting up as a limited company, including: 

• Higher setup and accounting costs. 

• Limited access to mortgage products. 

• Additional tax on dividends when profits are extracted personally. 

Chancellor’s Tip: It’s essential to seek advice from a qualified tax professional before making changes to your property ownership structure. 

Will Buy-to-Let Tax Rules Change Again? 

While there are no confirmed new changes for 2025, the UK Government has previously hinted at further reforms to property tax including possible changes to Capital Gains Tax and inheritance tax, so we should expect some potential changes. 

As a landlord, staying informed and proactively managing your tax strategy is more important than ever. With rising interest rates and tighter profit margins, optimising your portfolio for tax efficiency could be the difference between success and loss. 

Let Chancellors Help You Navigate 2025’s Property Landscape 

Whether you’re an experienced landlord or just starting out, Chancellors can help you stay ahead of buy-to-let legislation and protect your rental profits. 

From tax-efficient property strategies to tenant finding and property management, we’re here to help. Speak to our expert lettings team today or book your free rental valuation.