This year brings some significant changes for landlords, with new rules being introduced that could affect both the way you report your tax and the rights that your tenants have.
To help you navigate what’s changing, we’ve broken the updates down into tax related changes and key legal developments arising from the Renters’ Rights Act.
Income tax changes
Whilst not all the changes mentioned below come into effect in 2026, we have covered the key changes we believe you should be aware of this year. These are:
Abolishment of the Furnished Holiday Let (FHL) Rules. Whilst the FHL rules were abolished last year on 6 April 2025 it means, if you rent out accommodation on a short-term basis, this could impact your 2025/26 tax return, which will be due for submission by 31 January 2027.
The main changes are:
- Mortgage interest can no longer be deducted against profits, instead you will receive tax relief equal to 20% of the interest paid, meaning if you are a higher rate taxpayer you will pay more tax.
- Capital allowances will no longer be available, meaning you can only claim for the cost of replacing items, not their initial purchase. This will be a particular disadvantage when you are first getting a property ready to be let out.
- Profits must now default to a 50/50 split for spouses or civil partners who jointly own the property. Previously the FHL rules allowed you to choose your profit split. It is still possible to alter the profit split but doing so requires additional legal and tax forms and is less flexible.
- Capital Gains Tax reliefs previously available for FHLs are now no longer available.
- Profits no longer count as relevant earnings for pension contribution purposes. This could affect the amount you can pay into your pension each year.
Making Tax Digital for Income Tax
The new rules which change the way landlords must keep their records and how your income is reported to HMRC started on 6 April 2026, but not everyone will be affected straight away.
Your start date will depend on your level of gross rental income (i.e. income before any expenses) and turnover from self-employment, if applicable. The thresholds are as follows:
Over £50,000 in 2024/25 – start date of April 2026
Over £30,000 in 2025/26 – start date of April 2027
Over £20,000 in 2026/27 – start date of April 2028
The new rules will involve keeping digital records and submitting quarterly updates to HMRC for rental income, and self-employment where applicable. These rules are mandatory and penalties will apply for non-compliance.
2% increase on tax due on rental profits
This change was announced in the Autumn 2025 budget and will come into effect from 6 April 2027. As a result, the tax rates applicable to your rental profits will be:
Current rate Rate from 6 April 2027
Basic rate 20% 22%
Higher rate 40% 42%
Additional rate 45% 47%
From April 2027, the rules on how the Personal Allowance is applied are changing. It will need to be offset against employment income, trading income or pension income, meaning that you cannot first use it to cover your rental profits. As a result, this will be subject to higher tax rates than employment income for example, potentially resulting in more tax due.
Legal changes
The key changes from the Renters’ Rights Act 2025, effective from 1 May 2026, are:
- End of “no-fault” evictions
- Changes to tenancy agreements
- Controls and limits around how rent is set and increased, including limits on how often rent can be increased, a ban on bidding wars, and a requirement that landlords cannot accept a higher rent than what was advertised
- Discrimination against tenants with children or those in receipt of benefits is prohibited
- New grounds for reclaiming possession of a property
- Landlords must consider a tenant’s request to keep a pet in the property and cannot unreasonably withhold consent
Additional systems and standards are expected to be phased in from late 2026 onwards.
Given the significance of the new rules and regulations we would recommend that you obtain the appropriate advice and keep up to date with any further changes. The implications of the Renters’ Rights Act or any other legal matters should be discussed with a lawyer.
We are happy to answer questions regarding the tax changes or discuss any potential tax planning opportunities.
Contact Rachel Roberts for more information by emailing rachel.roberts@randall-payne.co.uk or call 01242 776000.