The Decline Of Small Buy-To-Let Landlords

A decade ago, being a small buy-to-let landlord could feel like a steady side business. Now many who have rented rooms and houses for years say the maths just doesn’t add up any more. Neil France, who has let properties for 15 years, told colleagues he feared tougher times — and he wasn’t wrong. The autumn budget confirmed a rise in tax on rental income from April 2027: an extra two percentage points, taking basic-rate tax on property income to 22%, higher-rate to 42% and additional-rate to 47%. France, who owns seven homes including multi-occupancy houses in Chelmsford, says the rise will cost him roughly £2,500 a year and force him to hike rents. That squeeze is the product of many moves over the past decade. Higher interest rates have eroded margins — about 80% of buy-to-let mortgages are interest-only — and HMRC figures suggest half of landlords pocket less than £10,000 a year in profit. Policy changes have piled on costs: the phasing out of mortgage interest relief, an extra 5% stamp duty on second homes, a cut in the capital gains tax allowance from £12,300 to £3,000, and a new requirement for rental homes to reach an EPC C standard by 2030. Landlords also face roughly 170 regulatory obligations and fresh duties from the recently passed Renters’ Rights Act. The consequence is fewer small-scale investors. Hamptons data shows the share of homes bought by landlords fell from 15.8% in 2015 to 10.8% in 2025, the lowest level in their records. Savills estimates about 200,000 properties left the private rental market in the year to March 2025. Some long-time landlords, like Philip Waters in Norwich, say they are packing up, convinced institutions will increasingly run the sector. That shift could have unintended effects. Policy wins for aspiring homeowners are measurable: a record 33% of homes sold in 2025 went to first-time buyers. But the Office for Budget Responsibility warned that shrinking returns for landlords may reduce rental supply and push rents higher over time — the very thing policymakers say they want to avoid. There are partial fixes: institutional build-to-rent is growing, with about £800m invested in one quarter and 298,000 build-to-rent homes nationwide. Yet this accounts for only about 2% of the private rented sector. Meanwhile housebuilding overall is far short of targets, and social rented stock has been shrinking for a decade. The big question now is trade-offs. Measures have eased the path to ownership for some but risk making renting more costly and concentrated in corporate hands — a shift that could leave low-income tenants worse off, even as first-timers get a foot on the ladder. --- Managing your business finances? TaxAce provides smart online accountancy services for UK businesses with flexible monthly plans. Image and reporting: https://www.theguardian.com | Read original article