Before You Become a Landlord: Section 21 Abolition, EPC Rules and the Mortgage Interest Trap

The regulatory environment for landlords in 2026

The private rental sector in England is in the middle of a significant regulatory transition. The Renters (Reform) Act, phased in since 2025, has fundamentally changed the landlord-tenant relationship. Section 21 no-fault evictions have been abolished. Landlords must now use one of the specified grounds for possession in the new scheme and follow the correct notice and court process. The minimum notice periods have changed and some grounds require a waiting period before notice can be served.

A mandatory property portal requires all landlords to register their properties and publish key information. A new private rental sector Ombudsman provides a redress route for tenants. Deposits remain capped at five weeks rent. These changes impose compliance costs and reduce landlord flexibility in ways that were not present when many existing landlords made their investment decisions.

The EPC C requirement and what it costs

From 2028, new tenancies in England and Wales will require the rental property to have an EPC rating of C or above. From 2030, all tenancies — including existing ones — will require EPC C. Properties currently rated D or below will need improvement works to meet the standard or cannot be legally let. The improvement works required to bring a D-rated property to C typically cost between £5,000 and £15,000 depending on the property type, current specification and the measures required — typically insulation, double glazing and heating system upgrades.

For a portfolio landlord with multiple D-rated properties, the EPC upgrade costs represent a significant capital commitment over the next two to four years. These costs should be factored into the investment case for any rental property purchased before the 2028 deadline. Purchasing a property that already meets EPC C avoids this capital requirement.

Mortgage interest relief restriction

The restriction of mortgage interest relief, phased in between 2017 and 2020, means that individual landlords (not companies) can no longer deduct mortgage interest in full against rental income for tax purposes. Interest is restricted to a 20 percent basic rate tax credit. For higher rate taxpayers, this means the effective tax relief on mortgage interest is 20 percent rather than 40 or 45 percent — significantly increasing the tax cost of leveraged rental property.

The impact on cash flow can be severe for highly geared landlords. A landlord with a rental income of £18,000, mortgage interest of £12,000 and other allowable expenses of £3,000 would have taxable profit of £3,000 under the old system. Under the current system, taxable income is £15,000 (£18,000 minus £3,000 expenses) with a tax credit of £2,400 (20 percent of £12,000). A higher rate taxpayer pays income tax of £6,000 minus the £2,400 credit — a net tax bill of £3,600 on rental profit that is effectively nil. This is the mortgage interest restriction trap that has caused many leveraged landlords to exit the market.

Stamp Duty Land Tax surcharge on additional properties

Purchasing a buy-to-let or additional residential property incurs a three percent SDLT surcharge on top of the standard residential rates in England. This applies from the first pound. On a £250,000 buy-to-let purchase, the standard SDLT is £2,500 and the surcharge adds £7,500 — a total of £10,000. This upfront cost reduces the initial yield and extends the time to break even on the investment. First-time landlords who have never owned a property before may be exempt from the surcharge in limited circumstances.

Licensing requirements

Houses in Multiple Occupation require mandatory licensing from the local authority where five or more people from two or more households share facilities. Many local authorities have introduced selective licensing schemes covering all privately rented properties in specified areas, requiring all landlords to hold a licence regardless of property type. Operating without a required licence is a criminal offence with unlimited fines and can result in a rent repayment order requiring repayment of up to 12 months of rent to the tenant.

Modelling the realistic return in 2026

Before purchasing a rental property, model the net return under current regulatory and tax conditions rather than historical or pre-regulation figures. Account for mortgage interest restricted to basic rate relief, SDLT surcharge upfront, EPC upgrade costs if the property is below C, letting agent fees if you will not manage the property yourself, landlord insurance, void periods, maintenance and repair, HMO or selective licence fees if applicable, and the cost of compliance with the Renters Reform Act requirements. Many properties that appeared to offer attractive yields under older assumptions offer significantly lower returns under current conditions.

Frequently asked questions

Can I still serve a Section 21 notice?

No. Section 21 no-fault evictions were abolished by the Renters (Reform) Act. Landlords must now use one of the specified grounds for possession in Schedule 1 of the Act. The most commonly used grounds for landlords who want to sell or move into the property have specific notice periods and in some cases waiting periods before notice can be served.

Should I buy a rental property in a limited company to avoid the mortgage interest restriction?

Companies are not subject to the mortgage interest restriction that applies to individual landlords — they can deduct interest in full. However, extracting profits from a company incurs additional tax through dividends or salary, the mortgage rates for company BTL purchases are typically higher, and the legal and administrative costs of operating through a company are greater. The optimum structure depends on your individual tax position and should be assessed with a tax adviser.

What is the EPC C requirement and when does it apply?

Properties let on new tenancies from 2028 must have an EPC rating of C or above. All tenancies — including existing ones — must meet EPC C from 2030. Properties that cannot be improved to C within a cost cap (currently £15,000 per property) may be exempt, but the exemption must be registered on the PRS Exemptions Register.

Do I need to register on the property portal?

The mandatory property portal requires all landlords to register their rental properties and publish specified information including EPC rating, gas and electrical safety certificates. Failure to register will prevent landlords from using certain possession grounds. Check GOV.UK for the current implementation timeline.

What insurance does a landlord need?

Standard home insurance does not cover rental properties. Landlord insurance covers buildings, liability to tenants and visitors, loss of rent if the property is uninhabitable, and legal expenses. HMO properties may require additional specialist cover to meet licence conditions. See our guide to landlord insurance for a full breakdown of coverage requirements.