Rising taxes and increasingly complex regulation are pushing many buy-to-let landlords to reconsider their place in the UK rental market, with growing evidence that the sector is steadily shrinking.
For long-standing landlords, the direction of travel has felt unavoidable. After more than a decade in the market, many now believe policy decisions have made private renting a political target rather than a supported part of the housing system. As one experienced landlord put it, landlords have replaced bankers and estate agents as an easy group to criticise.
That sense was reinforced by the Chancellor’s Budget announcement, which confirmed that from April 2027, tax on rental income will rise by two percentage points. Under the new measures, basic-rate taxpayers will face a 22% charge on rental income, higher-rate taxpayers 42%, and additional-rate taxpayers 47%.
For landlords operating on already thin margins, the impact is significant. Some estimate the change will cost them several thousand pounds a year, on top of the pressure created by higher interest rates over the past two years. Many say they have tried to limit rent increases, but are now left with little choice other than to pass on additional costs to tenants.
While buy-to-let landlords are not disappearing entirely, the sector has become far less profitable than it once was. Successive governments have tightened rules in response to poor standards, unfair evictions and extreme rent practices, while also aiming to reduce investor competition for smaller homes in favour of first-time buyers.
Rising borrowing costs have compounded the challenge. The majority of buy-to-let mortgages are interest-only, leaving landlords particularly exposed to higher rates. According to HM Revenue and Customs, around half of UK landlords make less than £10,000 in annual profit, leaving little room to absorb further cost increases.
Additional financial pressures continue to mount. Landlords face the cost of upgrading properties to meet stricter energy efficiency targets, with all rental homes required to achieve an EPC rating of C by 2030. This comes alongside compliance with more than 170 regulations, with further changes expected under the Renters’ Rights Act.
These costs build on earlier tax changes, including the removal of mortgage interest tax relief, the 5% stamp duty surcharge on additional properties, and a sharp reduction in the capital gains tax allowance. Together, these measures have significantly altered the financial case for remaining in the sector.
The result has been a steady reduction in landlord activity. Data from Hamptons shows that the proportion of homes purchased by landlords fell from nearly 16% in 2015 to just under 11% in 2025 — the lowest level since records began in 2007. Separate research suggests that around 200,000 rental homes were removed from the market in the year to March.
Property analysts note that while the latest tax rise alone may not trigger mass exits, it adds to a long list of changes that particularly affect smaller, individual landlords. Many are now questioning whether the effort and risk still justify the returns.
Some landlords believe government policy is deliberately steering the rental market towards large corporate operators and institutional investors. Smaller landlords argue they are being squeezed out in favour of pension funds and build-to-rent developers with deeper pockets.
Landlord representative bodies warn that further tax rises could ultimately harm tenants. They argue that higher landlord costs are likely to feed through into rents, particularly at a time when housing benefit rates remain frozen and affordability pressures are already high.
However, there is little sympathy for landlords among many would-be homeowners. Reduced investor competition appears to have helped first-time buyers, who accounted for a record 33% of all homes sold in 2025. Research suggests this share has more than doubled over the past decade.
Housing campaigners have also questioned claims of an impending landlord exodus, arguing that many landlords are still able to raise rents in a supply-constrained market. They maintain that stronger tenant protections are still needed to prevent unaffordable rent increases.
Economists, however, warn that the long-term consequences may be more complex. With around 4.7 million households in England reliant on the private rented sector, a sustained reduction in rental supply could push rents higher, making it harder for tenants to save for deposits and transition into homeownership.
The Office for Budget Responsibility has echoed these concerns, warning that continued erosion of landlord returns could reduce rental supply over time and place upward pressure on rents if demand continues to outstrip availability.
At the same time, housebuilding remains well below target. Only just over 208,000 homes were completed or converted in the year to March 2025, the lowest total since 2016, leaving a persistent shortfall in overall housing supply.
Social housing is also failing to plug the gap. Although new social rent construction reached its highest level in over a decade, England has still lost a net 180,000 social rented homes over the past ten years.
Build-to-rent developments are beginning to expand, supported by institutional investment, but the sector remains relatively small. Despite billions invested, purpose-built rental homes still make up only a small fraction of the private rented market.
While build-to-rent is helping to ease some pressure, industry experts agree it cannot yet replace the scale of supply historically provided by smaller landlords. As a result, the future of the private rental sector remains finely balanced between policy reform, investment appetite and the ongoing housing shortage.
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