Letting property used to be the simple side of your finances. Not any more. Three separate tax changes have landed on buy-to-let landlords in three consecutive Aprils, and a fourth arrives next year. If your tax planning still assumes the rules from 2023, this is your catch-up — and in places, your warning.
The key numbers:
- 6 April 2025 — furnished holiday lettings regime abolished
- 6 April 2026 — Making Tax Digital begins for landlords with gross income over £50,000
- 6 April 2027 — property income moves to separate rates of 22%, 42% and 47%
- £3,000 — your entire annual Capital Gains Tax allowance
- 60 days — the window to report and pay CGT after selling a let property
The holiday-let party is over: the FHL tax regime has gone
The furnished holiday lettings regime went on 6 April 2025, and with it the special treatment that made holiday lets the smart kid in class. They’re now taxed like any other residential let. The finance-cost restriction applies. Capital allowances can’t be claimed on new spending. The CGT reliefs that used to sweeten a sale, such as Business Asset Disposal Relief and rollover relief, no longer apply. And jointly owned properties default to a 50:50 split between spouses unless a Form 17 election says otherwise.
Own a holiday let and haven’t reviewed your position since the change? That review is overdue.
Making Tax Digital for Income Tax is live, and it isn’t optional
From 6 April 2026, Making Tax Digital for Income Tax applies to landlords whose combined gross income from property and self-employment was over £50,000. Digital records and quarterly updates to HMRC through MTD-compatible software, instead of one annual Self Assessment tax return. HMRC’s own portal won’t do the job, and neither will the spreadsheet that’s served you faithfully for a decade.
The threshold drops to £30,000 in April 2027, then £20,000 in April 2028, so most landlords with more than a property or two will be brought in over the next couple of years. HMRC is going easy on late-submission penalties for the first twelve months. Going easy on penalties is not the same as optional; the obligations apply from day one.
Our advice is simple. Open a dedicated bank account for your lettings and pair it with Xero or QuickBooks. Both are fully MTD-compatible, and moving before the rules reach you beats scrambling after they do.
Property income tax changes: new rates for rental income from April 2027
For 2026-27 you pay income tax on rental profits at your usual rate: 20% basic rate, 40% higher rate, 45% additional rate. Mark April 2027 in your diary though. From then, rental profits move onto separate property income rates of 22%, 42% and 47% — two percentage points above earned income at every band.
Two points sounds small. On a healthy portfolio it isn’t, and it’s exactly the kind of change worth planning for now rather than meeting on a tax bill in 2028.
The change came out of Autumn Budget 2025 and applies to individual, unincorporated landlords. And it isn’t travelling alone: the same package lifts the rates on savings and dividend income too. Part of the Treasury’s logic is that rental income carries no National Insurance, so passive income is being pulled closer to the tax paid on wages.
While we’re on rates: under the Section 24 rules, full mortgage interest relief for individual landlords ended back in 2020. You get a basic-rate (20%) tax credit on finance costs instead, whatever rate you actually pay. If you’re a higher-rate taxpayer, that difference is real money every single year.
Selling up? Capital gains tax and the 60-day clock
Capital Gains Tax on a property that isn’t your main home runs at 18% (basic rate) or 24% (higher rate), and the annual tax-free allowance is now just £3,000. The gain has to be reported and the tax paid within 60 days of completion. Sixty days goes quickly when you weren’t expecting a deadline, and the penalties for missing it are not sympathetic.
So… should you just put it all in a limited company?
It’s the question every landlord asks us, usually right after reading about the 2027 rates. Sometimes the answer is genuinely yes: limited companies can still deduct mortgage interest and other finance costs in full, and corporation tax at 19% to 25% can compare favourably. Shareholdings open up inheritance planning options too.
But it isn’t a free lunch. Dividend tax went up in April 2026. The stamp duty surcharge on additional purchases now sits at 5%. And moving properties you already own into a company can trigger CGT and stamp duty on the way in, which catches out more landlords than any other single mistake we see.
The right structure depends on your income, your portfolio, your plans and your exit. That’s a half-hour conversation, not a rule of thumb.
What landlords can do now
Letting property is a business now, whatever it felt like when you started. Run it like one: proper records in proper software, sales planned before they happen, and the company question answered with maths rather than a forum thread.
That’s what our landlord accounting service does all day. Call 01603 627963 or get in touch, and we’ll tell you exactly where you stand before the next April surprises you.
