Another squeeze on landlords: higher tax, more reporting, more regulation

It is difficult to escape the conclusion that life is getting harder for private landlords.

From April 2027, rental profits will be subject to Income Tax rates four percentage points higher than the corresponding rates applying to most other income. At the same time, increasing numbers of landlords will fall within Making Tax Digital and face quarterly reporting to HMRC.

And for landlords in Coventry and the wider West Midlands, there is another change much closer to home, with our region at the forefront of the new landlord registration regime.

Higher tax, more reporting and more regulation. Individually, each change may be manageable, but together they represent a significant additional burden on the private landlord.

Higher tax on rental profits from April 2027

From 6 April 2027, property income will be subject to separate Income Tax rates of 24%, 44% and 49%, depending on the landlord’s tax band. This represents an increase of four percentage points compared with the current basic, higher and additional Income Tax rates.

For example, a landlord with £20,000 of taxable rental profit could pay an additional £800 of Income Tax each year, while £50,000 of rental profit could mean an additional £2,000, assuming the income falls wholly within the same tax band.

For landlords already dealing with increased financing, maintenance and compliance costs, this represents a further reduction in the return they retain from their properties.

Making Tax Digital brings quarterly reporting

At the same time, more landlords are being brought within Making Tax Digital for Income Tax (MTD).

MTD applies from April 2026 to landlords and sole traders with qualifying gross income of more than £50,000. The threshold reduces to £30,000 from April 2027 and £20,000 from April 2028. Importantly, these limits are based on gross qualifying income before expenses, rather than taxable rental profit, and can include a combination of property and self-employment income. Landlords within MTD will need to maintain digital records and make quarterly updates to HMRC using compatible software.

Although the quarterly updates are not four additional tax returns, they nevertheless represent a significant change for landlords who may previously have dealt with their tax affairs only once a year.

West Midlands landlords are first in line for registration

Landlords in Coventry and across the West Midlands also face another new obligation under the Renters’ Rights Act 2026.

The new landlord registration system is being introduced regionally, with the West Midlands selected as the first area. For the first cohort of affected landlords, the registration period runs from 15 December 2026 to 14 March 2027.

The annual registration fee is £65 per property, meaning landlords with several properties will face both an additional annual cost and another ongoing compliance obligation. Registration also entails providing information about the landlord and property and, where required, evidence relating to matters such as gas and electrical safety and Energy Performance Certificates.

For Dafferns clients in Coventry, Warwickshire and the wider West Midlands, this is therefore not a change on the distant horizon. Our region will be the first to experience it.

Is being a private landlord becoming increasingly burdensome?

Individually, each of these changes might not appear particularly dramatic. Taken together, however, the picture looks rather different.

From 2027, many private landlords could find themselves:

• Paying an additional four percentage points of Income Tax on their rental profits
• Maintaining digital accounting records and reporting information to HMRC quarterly
• Registering themselves and their properties annually
• Complying with a wider range of obligations affecting the private rented sector

For landlords with only one or two properties in particular, the cumulative effect may prompt an understandable question: is the return still worth the increasing tax and administrative burden?

That does not necessarily mean that selling is the right answer. A decision to sell a rental property can itself have significant tax consequences, including Capital Gains Tax, and should be considered alongside financing costs, other income, retirement plans and wider family or estate planning objectives.

However, with West Midlands landlords among the first affected by the new registration requirements, and further tax and MTD changes following from April 2027, now is a sensible time for landlords to review their property portfolios and understand what the changes will mean for them.

If you would like to discuss how these changes may affect you or your property portfolio, please contact a member of the Dafferns Private Client Tax team.