2026 is a watershed year for UK landlords. From tenancy reform under the Renters’ Rights Act to the rollout of Making Tax Digital, proposed EPC upgrades, and the likelihood of greater HMRC scrutiny, the rules and the operating environment are changing fast.
Tom Roseff and Zoe Roberts look at what the New Year holds in store for the residential lettings sector and the action points that need to be considered.
Renters’ Rights Act: the biggest shift in a generation
The Renters’ Rights Act (RRA) is now law, with the first phase commencing 1 May 2026. On that date,
- Section 21 “no fault” evictions are abolished
- All assured shorthold tenancies (ASTs) convert to periodic
- Rent rises are limited to once per year
- Rental bidding is banned
- and councils gain stronger enforcement power, including significant civil penalties for noncompliance.
The RRA also introduces the requirement to accept no more than one month’s rent upfront, protections against discrimination (e.g., “No DSS” or “No children” policies), and fair consideration of pet requests. Further phases (late 2026 onward) will introduce a national PRS database and a new Private Landlord Ombudsman.
Zoe Roberts, Tax Partner, comments ‘The scale of the transition should not be underestimated, with the RRA imposing fines of up to £40,000 for serious breaches. Landlords need to act now to update tenancy documentation, possession processes and rent review procedures ahead of May’.
Action points for 2026:
- Map all existing ASTs and prepare periodic tenancy templates aligned to the Act
- Review your possession strategy under updated Section 8 grounds (e.g., sale, moving in, persistent arrears)
- Review advertising and onboarding practices to ensure compliance with the bans on rental bidding and discrimination
Making Tax Digital (MTD) for Income Tax: mandatory for larger portfolios from April
From 6 April 2026, landlords and sole traders with qualifying gross income over £50,000 will be required to keep digital records and submit quarterly updates via MTD compatible software (and note that the thresholds for falling within MTD reduce to £30,000 in April 2027 and £20,000 in April 2028). Importantly, the threshold is based on gross income, not profit, so many “modest margin” landlords can fall within the new regime.
Zoe Roberts comments: ‘Whilst the transition to MTD may seem onerous, proper preparation will be key to ensuring a seamless transition. Migrating to new software may also offer wider benefits, allowing the use of technology to automate more of what may traditionally have been a manual and time-consuming accounting process.’
Action points for 2026:
- Choose compliant software (e.g., Xero, QuickBooks, Sage) and connect bank feeds and agent statements to automate categorisation and source document capture
- Standardise your chart of accounts across properties to streamline quarterly submissions and end of period statements
- Train team members (or your bookkeeper) on Section 13 rent increase timing and ensure rent roll data aligns with quarterly MTD cycles
Energy performance (EPCs): prepare for a tighter standard and new metrics
Current rules require at least EPC band E to let a property. The Government has however consulted on an increase in the minimum to EPC band C for new tenancies from 2028 and all tenancies by 2030, alongside reform of EPC metrics to focus more on fabric performance, heating efficiency and smart readiness. A £15,000 cost cap per property (with potential affordability adjustments) and transitional arrangements were included in the consultation; the outcome is pending, but the direction of travel is clear.
Action points for 2026:
- Consider portfolio wide EPC reviews to identify “quick wins” (loft insulation, LED lighting, TRVs) versus larger measures (external wall insulation, heat pumps)
- Prioritise properties with frequent voids or higher energy bills; targeted upgrades can improve tenant satisfaction and reduce arrears risk
- Understand the potential costs of upgrading properties and plan for this, scheduling works to avoid clashes with the RRA rent review limit and MTD reporting peaks
Incorporation: should landlords consider (or reconsider) a company structure?
Incorporation (moving your rental “business” into a company) is likely to remain attractive, notably where interest restrictions bite and for long term succession planning. However, from 6 April 2026, Incorporation Relief (TCGA s162) switches from automatic to a claims based regime, with formal disclosure required in the Self-Assessment return, including transaction details, computations, and business description, giving HMRC clearer visibility and a more robust compliance hook.
Missed claims or thin evidence of a genuine property business) could trigger CGT exposure and enquiries. Whilst incorporation can work in principle where activity and management are substantia, but facts and degree are decisive.
Tom Roseff, Tax Partner, comments: “Incorporating a residential property lettings business can offer significant tax advantages, such as access to lower corporate tax rates and greater flexibility in profit extraction. However, early planning is essential to understand whether the relevant capital gains and SDLT reliefs are defensibly satisfied as our expectation is that we will see a significant uptick in HMRC activity in 2026 as they review such incorporations”.
Action points for 2026:
- If incorporating, prepare contemporaneous evidence of business activity: time logs, direct management notes, decision records (repairs, tenant selection, void strategy), and limited reliance on agents.
- Build a full disclosure pack (board minutes, valuations, contracts) and diarise the claims deadline to avoid procedural failure.
- Take professional advice at an early stage to understand the full tax implications and risks, including modelling of all tax outcomes (corporation tax, extraction costs, SDLT on transfers, impact on mortgage arrangements) before proceeding with an incorporation.
The bigger picture?
Tom Roseff comments: “I think a key question for 2026 is whether we will see smaller landlords seek to sell up and leave the sector. With the Renters’ Rights Act tightening operating rules and MTD ramping compliance costs, smaller landlords, especially those with one or two properties, may decide the sector no longer fits their risk-return profile. It remains to be seen what this means for the wider property market, but my prediction is that the appetite for quality properties aligned to tenant demand will remain high for larger landlords, albeit at the expense of smaller players being forced out of the sector”.
Zoe Roberts adds: “Any decision to sell needs careful tax and financing analysis. For unincorporated owners, CGT timing, lettings relief conditions, and reinvestment plans matter; for those who previously incorporated, the stakes are higher disposals can expose earlier relief assumptions to HMRC review, and unwinding structures may trigger tax and lender costs that erode sale proceeds.”
Note: Regulations and consultations referenced above are current as of 6 January 2026. Always seek professional advice for your specific circumstances and keep watch for further RRA commencement guidance and EPC consultation outcomes.
This material is for informational purposes only and should not be relied upon as professional advice.
