One of the most immediate impacts is on profitability. The increase in tax on rental income, due to come into effect from 2027, will reduce net returns across all bands. This sits alongside existing constraints, including the restriction on mortgage interest relief for individual landlords and the higher transaction costs associated with purchasing additional properties. As a result, what was once a relatively simple assessment of income against borrowing costs now needs to reflect the full tax position behind each deal.
Many landlords are therefore operating with tighter margins. This is particularly evident in areas where rental growth has not kept pace with rising costs. While rents have increased in many parts of the market, these gains are often offset by higher borrowing costs, increased regulation and ongoing maintenance requirements. The overall picture is one where profitability needs to be actively managed, rather than assumed.
This is feeding through into landlord behaviour. One of the most notable trends is the continued move towards limited company structures. For some landlords, this provides a more effective way to manage finance costs, as mortgage interest can still be treated as a business expense. The gap between personal and corporate ownership has widened in recent years, and more landlords are reviewing how their portfolios are held as a result. That said, incorporation is not the right answer in every case, and the detail needs careful consideration. Brokers have an important role to play in highlighting the options available, but decisions around ownership structures should always be made with support from a qualified tax adviser.
Alongside this, there is a more deliberate approach to portfolio strategy. Landlords are more selective about the assets they acquire, with greater focus on income reliability and long-term performance. That can mean prioritising properties in locations with consistent demand, or assets where there is scope to add value over time. In some instances, it also means reshaping an existing portfolio, with underperforming properties sold to support future investment.
Shifting landlord behaviour
More broadly, buy-to-let is being treated less as a passive investment and more as an active business. Tax sits at the centre of that thinking, influencing both how deals are structured and how portfolios are managed over time.