The tax landscape for buy-to-let landlords has shifted considerably over the past decade. 2026 brings further changes that affect how you structure your portfolio, when you file returns, and how much of your rental profit you keep.
This article covers the key tax changes affecting BTL investors in 2026 and what they mean for landlords in Portsmouth, Hampshire, and the Isle of Wight.
Section 24: still in full effect
The restriction on mortgage interest tax relief continues to apply. Landlords holding BTL properties in their personal name cannot deduct mortgage interest from rental income before calculating their tax bill. Instead, they receive a 20 per cent tax credit on the interest paid.
For higher and additional rate taxpayers, this remains a significant burden. A basic rate taxpayer paying GBP 10,000 in mortgage interest receives the full GBP 2,000 credit. A higher rate taxpayer paying the same interest still receives only GBP 2,000 — a shortfall of GBP 2,000 compared to the previous system.
This is why many landlords have incorporated, moving their portfolios into limited companies where mortgage interest is still treated as a deductible expense.
Stamp duty surcharge remains at 3 per cent
The 3 per cent stamp duty surcharge on additional properties continues in 2026. For a GBP 275,000 BTL property in Portsmouth, the stamp duty remains approximately GBP 10,250.
There has been speculation about potential changes to the surcharge for portfolio landlords, but as of 2026, no changes have been enacted. Factor the full surcharge into every acquisition budget.
Capital gains tax: rates and allowances
Capital gains tax rates for property remain at 18 per cent for basic rate taxpayers and 24 per cent for higher rate taxpayers. The annual exempt amount has been reduced further, standing at GBP 3,000 for the 2025-26 tax year.
If you are selling a BTL property that has appreciated significantly, the CGT bill can be substantial. For a property purchased at GBP 180,000 and sold at GBP 275,000, the gain of GBP 95,000 would attract a higher rate CGT of GBP 22,800. This makes exit strategy planning essential.
The 60-day CGT reporting rule
Since 2020, UK residents selling residential property must report and pay CGT within 60 days of completion. This continues in 2026. The reporting window is tight, and the penalties for late filing are significant — GBP 100 for the first day late, plus additional charges.
Ensure your solicitor or accountant is handling the CGT reporting as part of the sale process. Do not leave it for the year-end self-assessment.
Corporation tax for limited company landlords
If you hold BTL properties through a limited company, the headline corporation tax rate remains at 25 per cent for companies with profits above GBP 250,000. For smaller companies, the rate is tapered between 19 per cent and 25 per cent.
The advantage of incorporation remains clear: mortgage interest is deductible against corporation tax, the 25 per cent rate is lower than the 40 per cent or 45 per cent personal tax rate, and you can control when and how profits are extracted as dividends.
Dividend tax allowance
The dividend allowance for 2025-26 is GBP 500 per person. Dividend tax rates are 8.75 per cent for basic rate, 33.75 per cent for higher rate, and 39.35 per cent for additional rate taxpayers.
If you extract profits from your property company through dividends, the reduced allowance means more of your dividend income is taxed. This does not invalidate the incorporation strategy, but it does affect how much you take out of the company versus reinvesting in further acquisitions.
Making Tax Digital for income tax
MTD for income tax is being phased in from 2026. Landlords with gross rental income above GBP 50,000 must maintain digital records and submit quarterly updates to HMRC using compatible software. This affects portfolio landlords with significant rental income.
For most single-property landlords, the threshold means you are unlikely to be affected immediately. But the direction of travel is clear — digital record-keeping and quarterly reporting will eventually apply to all landlords.
Wear and tear allowance
The replacement of domestic items relief continues. You cannot claim the old 10 per cent wear and tear allowance. Instead, you claim the actual cost of replacing furnishings, appliances, and kitchenware. Keep receipts for every replacement item.
Planning for 2026
For personal name landlords
– Review whether incorporation makes financial sense, especially if you are a higher rate taxpayer
– Ensure your mortgage interest and rental income records are accurate for the Section 24 credit calculation
– Consider whether refinancing to a lower rate reduces your interest costs
For limited company landlords
– Review your dividend extraction strategy in light of the reduced allowance
– Ensure your quarterly MTD submissions are set up if your rental income exceeds GBP 50,000
– Consider retaining profits in the company for further acquisitions rather than extracting as dividends
Getting professional advice
Tax is individual to your circumstances. The figures in this article are illustrative. Every landlord’s situation is different, and professional tax advice is essential before making structural changes to your portfolio.
At Xelox Properties, we help investors understand how their acquisition strategy interacts with their tax position. We work with accountants who specialise in property tax and can make appropriate introductions.
Contact Xelox Properties today to arrange a no-obligation conversation about how we can help with your property investment goals.