Property & Landlords Tax Explained: The Complete 2025/26 Guide for UK Landlords

Introduction: Why Property Tax Matters More Than Ever for UK Landlords

Whether you own a single buy-to-let, manage multiple rental properties, or operate through a company, the UK tax rules for landlords have become increasingly complex. From the mortgage interest restriction to the new Making Tax Digital (MTD) obligations, directors and landlords face more compliance risks than ever before.

Understanding which allowances apply, when to report capital gains, and how to navigate auto-enrolment for digital tax reporting can make the difference between smooth compliance and costly HMRC penalties.

This Wex Insider guide brings together the key property and landlord tax rules for 2025/26, simplified into clear, practical insights.

Who Pays Tax on Rental Income

• Individuals, joint owners, and partnerships pay Income Tax on rental profits via Self Assessment.

• Limited companies pay Corporation Tax on property profits.

• Non-resident landlords are subject to the NRLS scheme, with tax withheld by agents/tenants unless HMRC approval is granted.

From 6 April 2024, the cash basis became the default method for unincorporated landlords (unless they opt out).

Allowable Expenses & Replacement Relief

Landlords can deduct many running costs before calculating taxable profits, such as:

• Repairs and maintenance.

• Letting agent fees and insurance.

• Council tax, utilities (if the landlord pays).

But HMRC excludes capital improvements. Instead, landlords may claim Replacement of Domestic Items Relief (e.g. new sofa or white goods) — provided the old item is replaced, not upgraded.

Mortgage Interest & Finance Costs

Since April 2020, landlords cannot deduct mortgage interest in full. Instead:

• All finance costs are given as a 20% basic rate tax credit against tax liability.

• Higher and additional rate taxpayers cannot claim full relief, increasing their tax bills.

This is known as the Section 24 restriction.

Small Allowances Landlords Can Use

• Property Allowance: £1,000 tax-free allowance against rental income (cannot be combined with expense claims).

• Rent-a-Room Scheme: £7,500 tax-free income for renting out furnished rooms in your main home (£3,750 each if shared).

Making Tax Digital for Landlords

From 6 April 2026, landlords with property and/or self-employment income above £50,000 must:

• Keep digital records.

• Submit quarterly updates to HMRC.

From 6 April 2027, the threshold lowers to £30,000.

A further phase is planned for those earning over £20,000 (expected April 2028).

Capital Gains Tax on Property Sales

• From 6 April 2025, CGT on UK residential property is:

  
  

  • 18% (basic rate band).

  • 24% (higher and additional rate).

  
  

• Annual Exempt Amount (AEA): £3,000 (or £1,500 for most trusts).

• Landlords must report and pay CGT within 60 days of selling a UK residential property.

Stamp Duty Land Tax (SDLT) for Landlords

When buying rental properties in England or NI, landlords face:

• Core residential SDLT rates.

• A 3% surcharge for additional dwellings.

• Scotland (LBTT) and Wales (LTT) apply separate rates.

Furnished Holiday Lettings (FHL) Abolished

The FHL tax regime ends from 6 April 2025 (for Income Tax & CGT; 1 April 2025 for Corporation Tax). Landlords with holiday lets must now follow standard property rules, losing enhanced CGT reliefs and capital allowances.

Non-Resident Landlords Scheme (NRLS)

Non-UK resident landlords:

• Must have tax withheld by letting agents or tenants.

• Can apply to HMRC (via Form NRL1) to receive rent gross.

• Still need to file Self Assessment returns to report rental profits.

Key Deadlines & HMRC Reporting

• Self Assessment: 31 Jan (online filing/payment).

• CGT 60-Day Return: within 60 days of completion.

• MTD Updates: quarterly (from April 2026 for >£50k).

• Record-keeping: at least 6 years for rental accounts and expenses.

How Wexley Protects Landlords

At Wexley & Associates, we ensure landlords:

• Maximise reliefs (property allowance, replacement relief, rent-a-room).

• Stay compliant with CGT, SDLT, and NRLS rules.

• Transition smoothly into Making Tax Digital.

• Avoid costly mistakes in HMRC reporting.

With our expertise, property investors safeguard their returns while focusing on growing their portfolios.

Secure Your Rental Profits, Stay HMRC-Compliant

The UK property tax landscape is changing rapidly. Whether you’re managing a single buy-to-let or a portfolio, professional support is the difference between missed reliefs and maximised returns.

Contact Wexley & Associates today for bespoke tax planning and full landlord compliance support.

References

• HMRC: Tax on property income

• HMRC: Property income manual

• HMRC: Finance costs restriction (Section 24)

• HMRC: Property allowance

• HMRC: Rent-a-Room scheme

• HMRC: Making Tax Digital for Income Tax

• HMRC: Capital Gains Tax rates

• HMRC: Report and pay CGT within 60 days

• HMRC: Stamp Duty Land Tax rates

• HMRC: Non-Resident Landlords Scheme

• HMRC: Furnished Holiday Lettings — abolition update

• Related Wex Insider article: NIC Rules & Employer Thresholds Explained for UK Directors and Employers