Tax cost hikes and digital red tape could push landlords to sell up
Buy to let landlords are set to face fresh tax hurdles that could lead to a squeeze in supply for the rental sector, according to new research.
The advisory firm Blick Rothenberg found that the government’s Making Tax Digital (MTD) scheme would add to the costs and administrative burdens of letting properties to tenants.
The government’s plan, set to kick off in April 2026, would introduce new stealth costs when filing digital tax returns and would require landlords to purchase proprietary software – or pay an accountant to do this on their behalf.
Heather Powell, Blick Rothenberg’s head of property, said: “Under the MTD regime, landlords with a gross rental income of £50,000 or more (£4,167 per month) in the year to 5 April 25 will be required to report their income, and expenditure, on quarterly tax filings from April 2026, with the first filing due by 7 August 2026.
“Filings will only be possible via commercial software that a landlord has to purchase, or their accountant.”
In April, accountancy software firm Free Agent found that a majority of small businesses are worried about the impact of the new rules.
Expensive and unwieldy?
The research revealed that a “sizeable minority” of companies are unprepared for the change – dubbed as a once in a generation shift in tax rules.
Almost a third of the businesses surveyed expressed concern about the financial burden of compliance, including software costs and operational changes.
Meanwhile, the price tag of the scheme has ballooned throughout its development, with the National Audit Office (NAO) warning in 2023 that costs have surged north of £1bn.
Powell added that the rule changes could nudge private landlords out of the market: “The returns for buy to let investors, particularly those with less than three properties, are going to be significantly impacted by this new regime. It is likely to be the final nail in the coffin for many.
“This will mean more homes for those who can afford to buy, but a problem for those who need to rent as the number of homes available for reduces, especially in London and the South East.”