Buy-to-Let Tax Changes: What Landlords Need to Know in 2026
From Section 24 mortgage interest relief to CGT changes, the tax landscape for landlords continues to evolve. We explain what's changed and how it affects your investment strategy.
Section 24: Mortgage Interest Relief Changes
The biggest tax change for landlords in recent years is Section 24, which was fully implemented in April 2020. Previously, landlords could deduct their mortgage interest payments from their rental income before calculating tax. Now, you receive a 20% tax credit instead.
For basic-rate taxpayers, this makes little practical difference. But for higher-rate (40%) and additional-rate (45%) taxpayers, the impact can be significant. In some cases, landlords can end up paying tax on 'profit' they haven't actually made, because the mortgage interest is no longer fully deductible.
This is one of the main reasons many landlords have moved to purchasing properties through limited companies, where mortgage interest remains a fully deductible business expense.
Capital Gains Tax on Property
When you sell a buy-to-let property, you'll pay Capital Gains Tax on any profit above your annual CGT allowance (currently £3,000 for 2025/26). The rates for residential property are higher than for other assets: 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.
You must report and pay CGT on UK residential property within 60 days of completion. This is a change from the previous system where you could wait until your next tax return.
There are legitimate ways to reduce your CGT liability — for example, deducting improvement costs (but not maintenance), using your annual allowance, and transferring property between spouses. A good accountant can help you plan for this.
Should You Use a Limited Company?
The question of whether to buy in your personal name or through a limited company is one of the most common questions we hear from landlords. There's no one-size-fits-all answer — it depends on your tax position, portfolio size, and long-term plans.
Advantages of a limited company: mortgage interest is fully deductible, corporation tax (currently 25%) may be lower than your personal tax rate, profits can be retained in the company, and it can be more tax-efficient for inheritance planning.
Disadvantages: higher mortgage rates from some lenders, additional costs (company formation, accountancy, annual returns), extracting profits triggers personal tax, and transferring existing properties into a company triggers SDLT and CGT.
We always recommend discussing this with a qualified tax adviser. We can arrange the mortgage for whichever structure you choose, and we work with lenders who specialise in limited company BTL lending.