James Hardwick, managing director of Charleston Financial Services, said the changes in the Autumn Budget just “continue the long-term shift toward the professionalised landlord model”.
He continued: “Our landlords overwhelmingly default to limited company structures when purchasing housing stock, and with a tighter financial environment coupled with the implementation of [the] Renters’ Rights Act, we will continue to see a pivot in investor strategy towards alternate property types – such as houses of multiple occupation (HMOs), multi-unit blocks, semi-commercial and commercial buildings – as investors seek stronger yields, together with refurbishment and development opportunities as a route to add day one returns.
“At the same time, increased compliance and reduced personal ownership incentives are likely to prompt a portion of smaller or accidental landlords to exit the market altogether, which will only squeeze the private rental sector and add to increasing rents. Altogether, the sector continues to diversify toward the alternative property sector for investors seeking better returns.”
Chris Sykes, director and property finance specialist at MSP Financial Solutions, said the change to property income tax was a “massive one for landlords”.
“I think this will be the final nail in the coffin for a lot of small or amateur landlords. It is even clearer now that government wish for landlords to operate as businesses. I’ve already had clients question me what their early redemption charges will be if they sell now,” he noted.
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Sykes said the market won’t be flooded and there is a “long lead time” for changes to come into place.
“We’ll also see some landlords moving their properties into company structures. One issue we face is people getting bad information on what taxes are involved with this, or assuming that a company structure is the best for them without actually getting tax advice,” he noted.
“People often read online or in the paper that limited company is the way to go, not considering that the legal cost and mortgage cost is higher, as well as the fact that they are now signed up to using an accountant for everything to do with a company that costs money too,” he said.
Key factors in tax advice would be how many properties are owned, whether you are a higher- or additional-rate taxpayer and the value of rental income.
Impact on holiday let market
Andy Soye, founder of Holiday Cottage Mortgages, said property income tax changes, mansion tax, local visitor or overnight stay levies and dividend and savings income tax rises would all impact the buy-to-let (BTL) and holiday let sectors.
Property income tax rates will rise by 2% from 6 April 2026, homes valued above £2m will be subject to a new tax from April 2028, dividend rates will rise from April 2026 and savings or property rates will go up from April 2027, which could have ramifications for owners of properties through a special purpose vehicle (SPV) or limited company who extract profits through dividends, as extraction costs would rise.
Soye said it was “unclear” at this stage how mansion tax will interact with business rates for holiday let owners who have made, or plan to make, the switch from council tax to business rates.
He added that local visitor levies could lower demand or require price changes from holiday let owners.
Soye said the Budget “narrows some of the historic[al] tax advantages of running holiday lets through a limited company”, due to dividend tax rises, and makes personal ownership “more immediately expensive” through higher property income tax from 2027.
“The mansion tax surcharge may cause some upset for bigger holiday lets, but this will impact only a small percentage of owners, as the average value of a holiday let is around £350,000 and not £2m. Furthermore, large holiday lets tend to buck the usual seasonality trends, as they tend to be ‘event-driven’ in terms of their bookings and usually outperform regular holiday lets by some considerable margin.
“There are also unresolved issues around how business rates will interact with this extra charge for those properties who do not pay council tax and how limited company ownership affects the charge,” he noted.
Ben Spier, head of policy and regulation at Sykes Holiday Cottages, said though the Chancellor’s proposal to increase property income tax rates from 2027 will “understandably raise concerns for some holiday let owners, the prospect of a reduction in business rates in 2026 provides a slight counterbalance”.
“However, this business rates change is only replacing the 40% relief that retail, hospitality and leisure businesses received on the back of Covid.
“In recent years, owners have navigated rising operating costs alongside a growing list of tax changes, including additional stamp duty, increased council tax and the abolition of the Furnished Holiday Let regime. We would caution against new taxes when the aim is to encourage tourism economies in support of the government’s growth agenda.
“The UK’s tourism sector relies on stability and confidence. Holidaymakers need affordable, good-quality accommodation, and holiday let owners need predictable returns to keep investing in their properties and local communities,” he said.
On the introduction of an overnight levy, Spier said this “threatens to deter people from choosing holidays in the UK”, which would be a “serious blow for the many communities that depend heavily on spending from the overnight visitors who will face this levy”.
He noted that the All-Party Parliamentary Group for Hospitality and Tourism estimates that day visitors spend around £36 per trip, compared with £193 for overnight visitors – a stark reminder of the economic impact that losing higher-spending guests could have.
“The UK’s tourism and hospitality businesses are already among the most heavily taxed in Europe, facing everything from steep business rates and corporation tax to some of the highest VAT levels in the sector. Adding a new tourism levy risks putting more pressure, and more admin, on the many small businesses – from holiday let owners to local pubs, shops and attractions – who rely on a thriving visitor economy.
“And all this for a relatively small extra return from visitors who still choose to come. Rather than adding another cost for visitors, disincentivising them when the aim is to attract more of them, the focus should be on ensuring that the substantial tax income already generated is properly directed to the local communities where it’s generated,” Spier said.
