The UK’s buy-to-let (BTL) tax landscape continues to shift, and 2025 is shaping up to be a pivotal year for property investors. Whether you’re a portfolio landlord or just starting out, it’s crucial to understand how the latest changes to tax policy, reliefs, and regulatory proposals will affect your bottom line.
As Rachel Reeves takes the reins at the Treasury, new measures are already in motion—and more are likely on the way. In this guide, we explore what landlords should be doing now to stay tax-efficient, compliant, and profitable.
What’s changing for BTL tax in 2025?
Section 24 mortgage relief rollback remains in place
The controversial phasing out of mortgage interest tax relief—known as Section 24—has been fully implemented since 2021. In 2025, landlords still cannot deduct mortgage interest from their rental income. Instead, they receive a flat 20% tax credit.
Impact: Higher-rate taxpayers are still disproportionately affected. For many, incorporation is becoming a more attractive route (see below).
Potential changes to Capital Gains Tax (CGT)
While there was no major CGT reform in the March 2025 Budget, speculation persists that the government may align CGT with income tax rates—especially for higher earners disposing of second properties.
What to do: If you plan to sell a BTL in the next 12–18 months, consider doing so under the current CGT regime. Also explore tax deferral options such as business asset rollover relief if reinvesting.
Reduced dividend allowances
For landlords who operate their BTLs via limited companies, dividend tax is becoming more punitive. From April 2025, the annual tax-free dividend allowance has been cut to £500 (down from £1,000 in 2024 and £2,000 in 2023).
Tip: Consider drawing income via directors’ salaries and pension contributions to reduce exposure.
Corporation tax holding steady
The headline rate remains at 25% for companies with profits over £250,000. Most BTL companies fall below this threshold and qualify for the marginal relief taper or small profits rate of 19%.
Incorporation remains tax efficient for many portfolio landlords, despite extra admin.
Landlord tax reliefs you can still claim in 2025
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Wear and tear allowance: No longer available as a blanket deduction, but landlords can still claim for actual replacement costs.
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Replacement of domestic items relief: Applies to furnishings, white goods, and other fixtures.
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Mileage allowance: 45p per mile for landlord-related journeys.
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Letting relief: Now very limited, but still available in specific live-in cases.
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Pension contributions: Still one of the most powerful ways to shelter rental income from tax.
Should landlords go limited?
If you:
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Are a higher-rate taxpayer,
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Have multiple properties,
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Plan to hold assets long term, or
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Want to reinvest profits,
then running your property business through a limited company may reduce your tax bill significantly.
However, incorporation comes with:
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Upfront CGT and stamp duty costs (though incorporation relief may apply),
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Ongoing accounting fees,
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Less flexibility when extracting profits.
Speak to a qualified property tax advisor before making the leap.
Final word: now is the time to get your tax affairs in order
With potential Labour reforms on the horizon, landlords must futureproof their portfolios. This means revisiting your ownership structure, rethinking exit plans, and ensuring every available deduction is being claimed.
Doing nothing could mean handing thousands to HMRC unnecessarily.
