The Autumn Budget brought another tax increase aimed at landlords, prompting many buy-to-let owners to reconsider whether the returns justify staying in the market.
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For some, the latest measures may be enough to leave the sector altogether.
Chancellor John Healey's first fiscal update revealed that the planned income tax increase on rental income next year will exceed earlier expectations.
Landlords are now facing another setback, after spending the first months adjusting to new rules under the Renters Rights Act.
Landlords have also faced tighter rules in recent years: mortgage interest relief has been restricted, additional stamp duty charges introduced, and they must ensure rented homes meet minimum energy-efficiency standards.
Chris Norris, chief policy officer at the National Residential Landlords Association (NRLA), told BFIA that many landlords were already unsure whether they could afford to stay in the sector. He warned that another tax increase could force more of them out, widening the gap between supply and demand and pushing rents higher.
What did the Autumn Budget announce for landlords?
In the 2025 Budget, former chancellor Rachel Reeves said income tax on rental income and savings interest would rise by two percentage points from April 2027. The new rates will be 22%, 42% and 47%, depending on the individual's tax band.
As landlords prepared, Healey announced another two-percentage-point increase in the 2026 Budget.
Starting in April 2027, the rates will be 24% for basic-rate taxpayers, 44% for higher-rate taxpayers, and 49% for additional-rate taxpayers.
How will higher property taxes affect landlord returns?
Connells Group, a property services provider, calculated how the tax changes could affect landlords' returns. Its figures account for mortgage interest relief and other expenses.
According to the estate agency brand, landlords receive average annual rental income of 16,478, with yearly expenses estimated at 5,108.
Using a mortgage rate of 5.25% and typical annual mortgage payments of 7,875, Connells Group puts landlords' yearly profit at 3,495.
At present, a basic-rate taxpayer would pay 699 in tax on that amount. From April 2027, the bill will increase to 839.
For higher-rate taxpayers, the tax is 3,113, compared with 2,973 now. The figure includes mortgage interest relief - a 20% tax credit calculated from mortgage interest payments.
A landlord paying the basic rate would keep 2,656 of the 3,495 annual profit, rather than 2,796. For someone on the higher rate, the yearly amount would fall to 382 from 522.
The 140 gap might seem modest on paper. Aneisha Beveridge, research director at Connells Group, says the bigger effect is on sentiment.
She says: "By itself, the change probably won't alter the investment case in a major way. But landlords are already facing higher borrowing, maintenance and regulatory costs, while wider tax changes have cut into returns.
"It also deepens the gap between personally owned rental properties and those run through limited companies. The latter pay corporation tax on rental profits instead of the higher personal tax rates."
Swipe to scroll horizontally Source: Connells Group
Not all landlords will have mortgages though.
Boydens, an estate agency brand, carried out a separate BFIA analysis of a mortgage-free property earning 1,200 in monthly rent - 14,400 annually - with 2,400 in allowable running costs. The taxable rental profit therefore comes to 12,000.
At present, a basic-rate landlord pays 2,400 in tax on this income, leaving 9,600 each year. From April 2027, the higher tax bill of 2,880 will reduce the amount retained to 9,120.
At the higher rate, tax on the rental income would currently be 4,800, leaving 7,200 of the annual profit. In 2027/28, the bill would rise to 5,280, cutting the amount retained to 6,720.
That means the latest Budget adds 480 in tax each year under either example, compared with current rates.
For a higher-rate landlord, profits fall by about 6.7% even when rent and running costs stay the same.
Is buy-to-let still worth it?
Norris of the (NRLA) says many landlords will regard Healey's Budget as a "vindictive raid on landlords".
He adds, "These costs arrive as existing pressures grow. Under the Renters Rights Act, landlords face a new annual registration fee for each property, along with expected Ombudsman membership."
Removing tax relief for genuine business expenses has made buy-to-let less viable while pushing rents higher. Borrowing costs add about 1,100 a year to a typical new buy-to-let mortgage, and required energy-efficiency upgrades could cost many landlords up to 10,000 per property.
Landlords are also dealing with weaker demand from renters and only modest rent increases.
Office for National Statistics figures show that average UK rents rose 3.8% to 1,406 in the year ending September 2026. That matched the increase recorded in August.
Philip Boyden, managing director of Boydens Estate Agents, expects landlords to scrutinize the numbers more carefully before considering other options.
He says: "A further tax increase would factor into the decision. It could change how much a buyer is willing to pay, which properties they look at, or whether they add to their portfolio. Investment would not necessarily be ruled out, but the property would need to justify the additional commitment."
Some landlords may decide to sell.
Property118, a website for landlords, found that two thirds plan to sell properties or leave the rental market within the next three years.
Beveridge of Connells Group cautions that this is not necessarily "a simple response."
Under the Renters Rights Act, landlords must give four months' notice, and they face restrictions on re-letting a property if a sale collapses. Those rules could deter some from putting a property on the market, even when returns are under pressure.
Any profit from the sale would still be subject to capital gains tax, and in the current buyers' market, there is no certainty you will achieve your asking price.
Beveridge says many landlords have instead transferred their portfolios into companies, paying corporation tax rather than income tax.
She cautions that transferring properties already held can bring substantial upfront tax charges, so the move will not suit every landlord.
Nouran Moustafa, practice principal at Roxton Wealth, expects landlords to respond differently: some will absorb the expense, while others may abandon plans to expand or sell their properties.
She adds: "There's an irony here: discouraging investors from private rentals does not, by itself, make rents cheaper for tenants. Property may still be worth investing in, but the assumption that any buy-to-let will deliver attractive returns has disappeared."
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