Buy-to-let investment remains resilient despite wave of incoming regulation

The latest research from Benham and Reeves shows that despite the imminent rollout of Making Tax Digital and the Renters’ Rights Act bringing new levels of compliance, regulation, and control over their properties, buy-to-let landlords are still buying up property assets at an increased rate, with the total buy-to-let mortgage value being lent increasing by more than 20% over the past year.

With significant legislative and tax changes set to take effect from April 2026, landlords across the UK are facing one of the most substantial shifts in operational requirements seen in recent years. Chief among these is the introduction of Making Tax Digital for Income Tax, which will fundamentally change how landlords report their earnings to HMRC.

What’s changing for landlords?

From April 2026, any landlord with an annual income exceeding £50,000 will be required to maintain digital records and submit quarterly updates of income and expenditure via approved software. This effectively increases the administrative burden, with four additional submissions required each year, alongside a final declaration to confirm overall income. A new penalty points system will also be introduced to enforce timely compliance.

Alongside tax reform, the Renters’ Rights Act is set to rebalance the relationship between landlord and tenant. The legislation will introduce greater protections for tenants, including stronger rights to keep pets, the abolition of no-fault evictions, and changes to tenancy structures that will make it more challenging for landlords to regain possession of their properties when required. These changes are expected to increase both the legal and operational complexities of managing rental homes.

Changes not deterring buy-to-let investment

It was feared that these new sweeping reforms would drive swathes of landlords away from the buy-to-let market, but Benham and Reeves’ analysis of Bank of England data* shows that investor appetite remains robust.

In 2025, an estimated £25bn worth of buy-to-let mortgages were issued, marking a 20.2% increase compared to 2024. The final quarter of 2025 alone accounted for £6.7bn, making it the strongest quarter of the year.

This sustained growth suggests that, contrary to widespread speculation, landlords are not retreating from the sector. Instead, many appear to be adapting to the evolving landscape while continuing to view property as a stable and attractive long-term investment.

However, further changes on the horizon could prove more influential.

Landlord income tax increases coming in 2027

From April 2027, the government is expected to introduce separate tax bands specifically for property income. Under these proposals, rental income will be taxed at 22% for basic rate taxpayers, 42% to 45% for higher rate taxpayers, and 47% for additional rate taxpayers. This represents an effective increase of 2% on rental profits compared to current levels and will apply regardless of a landlord’s other income sources.

These forthcoming tax changes could have a more pronounced impact on profitability across the buy-to-let sector and may, therefore, play a decisive role in shaping landlord sentiment in the years ahead. As a result, while current data points to continued investment, the longer-term trajectory of the market may hinge on how landlords respond to this next phase of fiscal reform.

Director of Benham and Reeves, Marc von Grundherr, commented:

“The buy-to-let sector has shown remarkable resilience in the face of sustained regulatory pressure, and the latest lending figures highlight that confidence in property investment remains strong.

However, there is no doubt that the changes coming in 2026 and especially in 2027 will test that resilience. Increased administrative requirements, reduced flexibility, and higher taxation will all weigh on profitability, and it is these longer-term financial implications that are most likely to influence landlord behaviour moving forward.

Landlords play a vital part in our society, so while tenant protections should be welcomed, and taxes paid fairly based on income, the government must also be careful not to drive such radical change that it causes large numbers of landlords to exit the sector. This would serve only to diminish supply and increase rent values for tenants who are already facing the likelihood of another difficult cost of living period over the coming months.”