Year-end tax planning for residential landlords

With the end of the tax year approaching, now is the time for residential landlords to review their tax affairs, maximise reliefs and prepare for upcoming tax changes.

1. Income Tax

Prepare for Making Tax Digital (MTD) for Income Tax – Mandatory from April 2026

Most landlords with property income over £50,000 (before expenses) must comply with MTD for Income Tax.

It is important that ahead of 5 April 2026 you:

• sign up for MTD
• put digital record keeping systems in place
• review ownership structures (e.g., partnerships or companies) to simplify MTD
• check agent and software support.
• This is the most significant compliance change since self-assessment began in 1995.

Optimise your taxable income

• Pension contributions – Accelerating contributions could reduce your taxable income; those earning over £100,000 may reclaim lost personal allowances, giving an effective marginal relief of up to 60%.
• Charitable donations – Gift Aid donations can also help to reduce your taxable income.
• Refurbishment timing – Bringing forward planned refurbishments to secure relief in 2025/26.
• Share income – Consider whether property is more tax efficient owned jointly, perhaps with a lower-rate taxpayer. This may reduce the overall tax exposure.
• Tax band planning – With the additional rate threshold fixed at £125,140 for 2025/26 and 2026/27, consider whether to accelerate or defer income or expenses which can help reduce exposure to higher tax bands.

Holding property in a family investment company

Restrictions on loan interest relief for individual landlords continue to make corporate ownership attractive for some landlords. Companies pay corporation tax on profits, which may be lower than personal income tax rates depending on profit levels. They also offer flexibility on profit extraction – it may be beneficial to control the distribution of profit from the company to individual shareholders.

• It is worth reviewing whether a company could be right for you ahead of the year-end, particularly in view of the introduction of MTD and the changes in tax rates.

We cover everything you need to know on Family Investment Companies.

2. Capital Gains Tax (CGT)

Residential property CGT remains 18% (basic rate) and 24% (higher rate).

The annual exemption remains at £3,000 for 2025/26 and 2026/27.

• You should review the timing of disposals to use allowances, relieve losses, or transfer assets between spouses.

Remember the 60 day reporting and payment deadline for residential gains.

3. Income tax rate increase – planned from April 2027

The Autumn Budget 2025 confirmed that rental income will be taxed at separate, higher rates which are 2% higher than the current rate from April 2027 (22%, 42%, 47%).

This creates new planning opportunities in 2025/26:

• consider accelerating income into 2025/26 and 2026/27
• defer deductible expenditure to benefit from higher relief from April 2027
• review whether incorporation becomes more attractive before the new rates apply
• review long term cashflow and profit extraction strategies for property companies.

Note that the additional rate of tax on dividends remains unchanged at 39.35%.

Annual Tax on Enveloped Dwellings (ATED)

For companies holding residential property over £500,000:

• check valuations for 2025/26
• confirm whether reliefs apply (e.g., property rental business relief)
• plan disposals or de enveloping strategies if ATED becomes uneconomic.

Directors’ Loan Accounts

For shareholders of property rich companies:

• avoid s455 charges by repaying overdrawn loan accounts before 9 months following the end of your accounting period
• alternatively, consider declaring dividends before 5 April 2026 to clear balances where loans will not be repaid.

How Crowe can help

We can help landlords with a review of the tax efficiency of their affairs, including the following:

• reviewing the ownership of landlord’s property portfolios for tax efficiency
• helping landlords efficiently pass wealth or income to family members
• helping landlords affected by the loan interest restriction rules structure their tax affairs
• helping review the remuneration policies and general affairs of those landlords with property investment companies.

With the tax rules taking a big bite out of financial returns, it is more important than ever that landlords structure their affairs in a tax efficient way.

At Crowe, we can help you with all aspects of property taxation, ensuring your affairs are structured to ensure you get the most out of your property portfolio.

For more information, please get in touch with your usual Crowe contact.