Caroline Foulger examines the future of residential landlords in IFA Magazine

This rise, when combined with the many incremental changes introduced over recent years, risks becoming the point at which some landlords simply cannot absorb any further financial pressure. Many may now feel compelled to consider incorporation, restructure their portfolios, or even leave the sector entirely. The cumulative effect of tightening rules, reduced reliefs and increasing costs means that the landlord landscape is becoming markedly less appealing.

She notes that the challenges began long before this latest tax rise. Mortgage interest has not been fully deductible since 2020, with only a 20% tax credit available, which significantly affected highly leveraged landlords. Although interest rates have recently fallen below 4%, many landlords are still feeling the strain as they come off fixed‑rate deals taken out during higher‑rate periods. The abolition of the Furnished Holiday Let regime in April 2025 removed valuable reliefs, while falling or stagnant flat prices – particularly in London and the South East – have further eroded the traditional investment appeal of residential property.

Looking ahead, Caroline highlights that Making Tax Digital will introduce additional administrative burdens from 2026–2027, requiring quarterly reporting for those with rental income above the new thresholds. In addition, rental reforms taking effect from May 2026 will make managing tenancies more complex: rolling periodic tenancies will replace fixed terms; Section 8 grounds will be used more frequently; rent increases will be limited to once a year; and landlords will face wider restrictions regarding tenants, pets and notice periods. These changes add both cost and complexity at a time when net rental yields are already diminishing.

Caroline concludes by emphasising that landlords who intend to remain in the sector must plan proactively. This includes reviewing rent levels before the new legislation comes into force, reassessing the merits of incorporation potentially via partnership to maximise available CGT reliefs – preparing for the administrative demands of Making Tax Digital, and revisiting wider estate planning in light of reduced net income. With the landscape changing so significantly, she stresses the importance of early, holistic review to ensure long‑term resilience and to determine whether remaining in the residential letting market continues to be viable.