With the Renters Reform Bill, changes to SDLT, increased regulation of agents, and Making Tax Digital for Income Tax (MTD) coming into effect, the UK’s private rental sector is facing significant upheaval. As HMRC’s research reveals the pressures facing property investors, it’s the perfect time for landlords to take stock and perhaps reconsider how they own their portfolios.
What is Making Tax Digital for Landlords?
From April 2026, landlords with qualifying rental income over £50,000 will be required to maintain digital records and submit quarterly updates to HMRC using approved software as part of the Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) regime. A year later, in April 2027, the threshold drops to £30,000, and then again down to £20,000 in April 2028, bringing even more landlords into the digital fold.
What does this mean for you?
- Keep digital records: All rental income and expenses must be recorded using HMRC-compatible software.
- Submit quarterly updates: Every three months, you’ll need to send a summary of your income and expenses to HMRC.
- Final end-of-year declaration: Once the tax year ends, a final summary is required to confirm your income and claim any reliefs or allowances.
- Exemptions: If your rental income is below £20,000, you’re not currently required to join MTD, though this could change in future.
These changes are designed to make tax reporting more accurate and efficient, but for many landlords, they also mean more admin and a steep learning curve.
At BHP we are working with clients to help them find the most suitable software solutions for them to make sure that they are not only ready to face MTD, but potentially even find some benefits from adopting software that can help reduce your admin or stay on top of your portfolio more readily.
The State of the Landlord Market: What the Latest Research Reveals
Recent research by Ipsos, commissioned by HMRC, provides a interesting snapshot of the UK’s landlord community:
- Most landlords are individuals: A staggering 93% of landlords own property in their own name, with just 7% operating through a company and 5% via a partnership.
- Small portfolios, modest profits: Over half (55%) own just one rental property, and the average portfolio is three properties. Nearly two-thirds (63%) earn less than £20,000 in annual gross rental income, while 52% make less than £10,000 profit each year.
- Tax complexity is a growing burden: 43% of landlords still manage their own tax affairs, but many find the process challenging due to complex and ever-changing rules (40%), lack of expertise (19%), and the sheer volume of work (12%).
- Reliance on professionals: Almost half (49%) now employ accountants to handle their tax, and 63% use letting agents to manage their properties.
- A wave of exits? Around a quarter of landlords (24%) plan to reduce their holdings in the next year, rising to a third (33%) over five years. Just over half (53%) have no plans to sell, but the sector is clearly under pressure.
Why Incorporating Your Property Portfolio Could Be a Smart Move
With MTD looming and tax rules becoming ever more complex, landlords are seeking ways to simplify their affairs and reduce their tax burden. One increasingly popular option is to incorporate—that is, to hold property through a limited company.
Key benefits of incorporation:
- Tax efficiency: Company landlords often pay less tax overall, thanks to lower corporation tax rates and the ability to deduct mortgage interest as a business expense. There may be Capital Gains Tax and SDLT tax charges on incorporation but there are reliefs that can help reduce or minimise these tax charges in certain circumstances.
- Simpler succession planning: Companies can make it easier to pass on property to the next generation.
- Potential exemption from MTD: If your only income is from property held through a company, you will not be subject to MTD for ITSA, as these rules currently only apply to individuals with property held by partnerships, trusts or companies outside of the rules.
Looking Ahead
The message from the Ipsos research is clear: a significant proportion of the UK’s landlord sector is dominated by small-scale, individual investors who are feeling the pinch from rising costs, regulatory change, and tax complexity.
With MTD for landlords just around the corner, now is the time to review your property ownership structure and consider whether incorporation could help you save tax, simplify your affairs, and avoid some of the MTD requirements—at least for now. Whilst the tax implications of incorporation need to be considered carefully, and whilst it may not be the right option for all, for many it would be worth exploring.
If you’d like to discuss your options or need help navigating the new digital tax landscape, get in touch; we’re here to help you stay ahead of the curve!
