It has never mattered more for landlords to think ahead about their tax affairs, rather than only when tax returns are filed once a year - soon to be four times a year.

Why is that?

At a time of rapid regulatory change affecting the returns available to residential property investors, alongside a series of government decisions going back almost a decade that have steadily increased the tax burden on real estate, the relatively small difference that good tax planning can make can be the difference between a profitable and a loss-making investment.

Most recently, new (higher) property tax rates and frozen thresholds announced in the latest Budget are pushing more landlords into higher tax bands. Add to that stamp duty increases, the pernicious withdrawal of higher-rate tax relief on mortgage interest (which in the wrong circumstances can result in effective income tax rates of over 200% on property income), and countless other examples, and a clear picture emerges: tax planning is now a critical component of any property investment strategy.

And it isn’t just tax rates that have hit landlords. The introduction of Making Tax Digital (MTD) from April brings an entirely new reporting regime and significantly higher compliance costs, particularly for those investing in property.

So, what should landlords be doing?

First and foremost, any serious landlord should be reviewing the structure used to hold their portfolio. There is an entire article to be written on the pitfalls and complexities of incorporating an existing property portfolio into a limited company and current HMRC policy makes this practically impossible in all but a handful of circumstances; but for most landlords, if not all, future acquisitions will almost certainly need to be made through a company in order to minimise tax exposure.

There are, of course, non-tax considerations, particularly the additional and often disproportionate costs for very small portfolios, as well as the current lending environment. Notwithstanding these, it is increasingly difficult to justify advising landlords to purchase residential investment properties in their personal names, especially where mortgage finance is involved.

Operating through a limited company can offer:

- Lower corporation tax rates compared to higher personal income tax rates

- Full deductibility of mortgage interest

- Greater flexibility in profit extraction

That said, generic advice is always dangerous, and any serious landlord should seek advice tailored to their specific circumstances.

Other important tax and financial issues that should be assessed include:

- Whether to sell underperforming properties ahead of further tax increases

- Ensuring that all available tax deductions are maximised, including capital     allowances, which are often overlooked

- Whether diversification into lower-taxed asset classes would be appropriate

An increasingly common issue within property portfolios relates to properties that were once the landlord’s private residence and, following a house move, were retained as rental investments. For capital gains tax purposes, the exempt portion of any gain on disposal is calculated by reference to the period the property was occupied as a main residence as a proportion of total ownership.

In periods such as the present, where capital growth is minimal or non-existent, the taxable element of any future gain can increase rapidly. It is therefore highly advisable to review the current position and model potential future disposals to determine whether selling sooner may avoid a rapidly deteriorating tax outcome.

I am often asked for a shortlist of immediate actions, and I would strongly recommend landlords consider:

- Reviewing their 2025/26 tax position and modelling the impact of the 2027 rate changes

- Ensuring bookkeeping systems are fully Making Tax Digital compliant

- Reassessing mortgage products and overall leverage levels

- Conducting a detailed profitability review of each individual property

The UK tax environment for landlords is becoming increasingly complex and more expensive. However, with early and proactive planning whether through restructuring, optimising expenses, or making strategic disposals, landlords can remain compliant while protecting long-term returns.

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