Last reviewed: June 2026
TL;DR- Section 24 (2017-2020): mortgage interest relief restricted to 20% tax credit for individual landlords.
- SDLT additional dwelling surcharge (2016): 3% surcharge on additional residential property purchases.
- CGT rate on residential property (2015 onward): higher rates than main CGT rates; 60-day reporting and payment window introduced 2020.
- Furnished Holiday Lettings regime abolished April 2025: short-term lets now taxed as ordinary residential lettings.
The Cumulative Tax Changes Since 2015
The UK buy-to-let market has experienced a series of significant tax changes since 2015, each individually impactful and cumulatively transformative for the economics of residential property investment. Understanding these changes and their interaction is essential for any landlord or prospective landlord assessing the current and future viability of their portfolio.
Section 24: Mortgage Interest Restriction (2017-2020)
The most significant change for mortgaged landlords: from April 2020, individual landlords can no longer deduct mortgage interest from rental income. A 20% basic rate tax credit on finance costs replaced the full deduction. Higher and additional rate taxpayer landlords pay significantly more income tax on the same rental income as a result. Limited company landlords were not affected.
Additional SDLT Surcharge (April 2016)
Since 1 April 2016, purchases of additional residential properties in England and Northern Ireland attract a 3% surcharge on top of standard SDLT rates. This applies to buy-to-let purchases, second homes and holiday homes. The surcharge significantly increases the upfront cost of adding to a property portfolio. Equivalent surcharges apply in Scotland (LBTT) and Wales (LTT). The surcharge rate should be confirmed via GOV.UK as it is subject to change.
Capital Gains Tax Changes
CGT on residential property disposals (excluding the main home) is charged at higher rates than other CGT assets. The rates applicable in 2026-27 should be confirmed via GOV.UK and HMRC guidance. A 60-day reporting and payment requirement for CGT on UK residential property disposals was introduced in April 2020 - landlords must report and pay any CGT due within 60 days of completion of a disposal. Previously, CGT on property was payable through the annual self-assessment cycle (up to 22 months after the disposal year end).
Lettings relief, which previously provided CGT relief for periods when a property was let, was restricted from April 2020 to apply only where the landlord shared occupation of the property with the tenant. For most landlords, lettings relief is no longer available.
Abolition of Furnished Holiday Lettings Regime (April 2025)
The Furnished Holiday Lettings regime, which provided significant tax advantages including full mortgage interest deductibility, capital allowances, business asset disposal relief and pension contribution eligibility based on FHL profits, was abolished from 6 April 2025. From that date, FHL income is taxed as ordinary property income subject to all the restrictions applicable to residential lettings, including Section 24.
The Combined Impact
The combined effect of these changes has materially reduced the after-tax returns from residential property investment for many individual landlords, particularly those with high LTV mortgages and in higher income tax bands. The changes have driven some landlords to sell, others to restructure into limited companies, and others to review the viability of their portfolio property by property.
Frequently Asked Questions
Are there any remaining tax advantages of buy-to-let investment?
Buy-to-let investment still offers: rental income (subject to Section 24 and income tax); potential capital appreciation (subject to CGT on disposal, though the 28-year average annual growth in UK house prices is substantial); the ability to use mortgage leverage to amplify returns; and for limited company owners, full finance cost deductibility. The tax changes have reduced but not eliminated the investment case for BTL - whether it remains attractive depends on the specific property, financing structure and investor circumstances.
Is incorporation into a limited company the right response to Section 24?
Incorporation avoids Section 24 for future purchases but triggers SDLT and CGT on any existing personally held properties transferred into the company. The long-term tax saving from company ownership must outweigh the upfront transfer costs for incorporation to make sense. For portfolios with large capital gains and significant SDLT exposure on transfer, the break-even period may be very long. Specialist tax and financial advice specific to the individual portfolio is essential before any incorporation decision.
Has the additional SDLT surcharge been increased since 2016?
The additional dwelling SDLT surcharge was increased from 3% to 5% in the Autumn Budget 2024 with immediate effect from 31 October 2024. The current applicable rate should be verified via the GOV.UK SDLT calculator before any purchase decision. Equivalent surcharges in Scotland and Wales may have different rates and should be confirmed with the respective tax authorities.
How does the 60-day CGT reporting rule work for landlords?
When a UK residential property (that is not the owner's main home) is sold, the vendor must submit a CGT return to HMRC and pay any CGT due within 60 days of completion. This is done through HMRC's Capital Gains Tax on UK Property service (online). The CGT is calculated on the gain above the annual exempt amount (check GOV.UK for the current exempt amount, which has been reduced in recent years). Failure to report and pay within 60 days may result in interest and penalties.
