Buy-to-let tax has changed more in the last decade than in the forty years before it, and 2026 adds another layer with Making Tax Digital.
Landlords who still run their lettings the way they did in 2015 are either overpaying tax or under-declaring it, and both cost money. These are the ten rules that decide most landlords' bills this year.
1. Mortgage Interest Only Earns a 20% Credit
You can no longer deduct mortgage interest from rental income. Instead, you get a basic-rate tax credit worth 20% of the interest. For higher-rate taxpayers, that's half the relief the old system gave, and because the calculation works on gross rental profit, it can push your total income over thresholds you'd otherwise stay under, including the £60,000 Child Benefit line.
2. The £1,000 Property Allowance Is Either/Or
Rental income under £1,000 a year needs no return at all. Above that, you can deduct either the flat £1,000 allowance or your actual expenses, never both. Landlords with real costs like insurance, repairs and letting agent fees almost always do better claiming actual expenses.
3. Repairs Are Deductible, Improvements Are Not
Fixing a broken boiler is a repair and comes off your rental profit now. Replacing a kitchen with a visibly better one is an improvement and only counts against capital gains when you sell. The boundary is genuinely blurry, replacing single glazing with double glazing counts as a repair these days, so keep invoices detailed enough to argue the point.
4. Replacement of Domestic Items Relief Has Rules
Replacing a washing machine, sofa or carpets in a furnished let is deductible, but only on a like-for-like basis, and the original purchase when you first furnished the property never qualified. Upgrade from a washer to a washer-dryer and only the washer-equivalent cost counts.
5. Sell a Rental and You Have 60 Days
Capital gains tax on a residential property sale must be reported and paid within 60 days of completion, on a separate online return, not your January Self Assessment. Miss it and penalties start at £100 and climb. Solicitors don't always warn sellers, so the deadline is yours to track.
6. Residential CGT Rates Are 18% and 24%
With the annual exempt amount down to £3,000, nearly all property gains are taxable now. Basic-rate taxpayers pay 18% on the slice of gain within their band and 24% above it. Timing a sale for a low-income year, or splitting ownership with a spouse before selling, changes the bill materially. That's planning to do before exchange, not after.
7. Joint Ownership Splits Follow Fixed Rules
Married couples are taxed 50/50 on jointly owned property by default, regardless of who actually banks the rent. Shifting income to a lower-earning spouse needs a genuine change in beneficial ownership plus a Form 17 election to HMRC. Done properly it's one of the simplest landlord tax savings available; done informally it doesn't work at all.
8. The Extra 5% Stamp Duty Never Went Away
Additional dwellings carry a 5% SDLT surcharge on top of standard rates in England and Northern Ireland. On a £250,000 purchase, that's £12,500 before ordinary stamp duty. Factor it into yield calculations at offer stage; several buy-to-let deals only look profitable because the buyer forgot it.
9. Furnished Holiday Let Perks Are Gone
The FHL regime was abolished in April 2025, taking with it the mortgage interest deduction, capital allowances and CGT reliefs that made holiday lets tax-favoured. Airbnb landlords now follow the same rules as everyone else, and anyone whose sums relied on the old regime should re-run them for 2026.
10. MTD Arrives for Landlords in April 2026
From April 2026, landlords with combined property and self-employment income over £50,000 must keep digital records and file quarterly updates through software, with the £30,000 tier following in 2027. Rental income still flows through Self Assessment this year, and how that return works, from registration to payments on account, is set out in our complete Self Assessment guide. The filing and payment dates themselves are in our 2026/27 deadlines guide. Quarterly reporting makes spreadsheet-and-shoebox record keeping unworkable, so the software move needs to happen this year, not next April.
What Landlords Should Do Now
Three checks pay for themselves: confirm your interest relief is being calculated as a credit rather than a deduction, review whether joint ownership is arranged in the most tax-efficient split, and get MTD-ready software in place before April. Landlord accounts, MTD setup and property CGT planning are all part of the tax services we run for landlords at ASPIRE UK. If your portfolio has grown past the point where a January panic-file feels safe, book a free consultation and get the structure looked at properly.
