As the UK’s buy-to-let sector faces a barrage of tax hikes and regulatory changes, many landlords are finding it increasingly difficult to maintain their rental businesses. The latest blow came in the form of a surprise announcement in the November budget, where Chancellor Rachel Reeves revealed that from April 2027, taxes on rental income will rise by two percentage points.
For seasoned landlord Neil France, who owns seven properties across Merseyside and Essex, this means an additional £2,500 in annual costs. “I can’t absorb that kind of hit,” he laments. “We’ve already been hammered by rising interest rates and other changes to the sector, and I’ve tried to pass those on to tenants as gently as possible. But I had to write to all of them and say rents will be going up again from next year.”
The buy-to-let landscape has undergone a significant transformation in recent years, with successive governments tightening regulations in a bid to curb excesses and make housing more accessible for first-time buyers. Measures such as the phasing out of mortgage interest tax relief, the introduction of a higher stamp duty on rental properties, and the requirement to upgrade homes to minimum energy efficiency standards have all taken a toll on landlords’ profitability.
According to research from HM Revenue and Customs, around half of landlords in the UK receive less than £10,000 in annual profits, while 80% of buy-to-let mortgages are interest-only. This has led to a steady exodus of smaller-scale landlords, with the share of homes bought by investors dropping from 15.8% in 2015 to just 10.8% in 2025 – the lowest level since 2007.
“It’s just becoming far more difficult for private, smaller landlords – almost impossible,” says Philip Waters, 62, who is planning to exit the sector after two decades of managing four properties in Norwich. “The government is clearly wishing for corporate and pension companies to run the rental sector.”
While the latest tax hike may not be enough to push many landlords over the edge on its own, industry experts warn that it could accelerate the next wave of smaller landlords leaving the market. “It comes on the back of a series of changes that is likely to accentuate the next wave of smaller landlords saying, ‘You know what? It’s no longer worth the hassle,'” says Lucian Cook, head of residential research at Savills.
The implications of this trend are significant. With fewer landlords catering to the estimated 11 million people who rent their homes in England, the risk of rising rents and reduced supply looms large. The Office for Budget Responsibility has cautioned that the “successive eroding of private landlord returns” could lead to a “steady long-term rise in rents if demand outstrips supply.”
However, not everyone is sympathetic to the plight of landlords. Ben Twomey, chief executive of the tenant advocacy group Generation Rent, argues that most landlords can absorb the increased costs and that rent hikes are often driven more by speculation than necessity. He also points to the Renters’ Rights Act, which aims to provide greater protections for tenants against unfair evictions and rent increases.
Ultimately, the future of the UK’s rental market remains uncertain. While build-to-rent developments and government efforts to boost social housing supply offer some relief, the disappearance of tens of thousands of privately rented properties is a trend that is likely to have far-reaching consequences for both landlords and tenants in the years to come.