What UK small landlords can expect in 2026?

As we move through the final weeks of 2025, UK landlords are facing one of the most transformative periods in the history of the private rented sector (PRS). With the Renters' Rights Act set to come into force on 1 May 2026, significant tax changes already in motion, and ambitious energy efficiency targets on the horizon, the landscape for property investment is shifting dramatically.

Whether you're a seasoned portfolio landlord or someone managing a single buy-to-let property, understanding what lies ahead is essential for making informed decisions about your investments. This comprehensive article explores the key changes, challenges, and opportunities that will shape the rental market in 2026 and beyond.

The Renters' Rights Act: the biggest shake-up in decades

The Renters' Rights Act 2025, which received Royal Assent on 27 October 2025, represents the most significant reform to the private rented sector since the Housing Act 1988. The first major wave of changes will take effect on 1 May 2026, fundamentally altering how landlords operate.

The end of Section 21 and fixed-term tenancies

From the commencement data 1 May 2026, landlords will no longer be able to issue Section 21 'no-fault' eviction notices. All existing assured shorthold tenancies will automatically convert to periodic tenancies on this date, regardless of any remaining fixed term. This means that a three-year tenancy signed in April 2026 will instantly become a rolling monthly tenancy from 1 May.

For landlords, this represents a significant shift in control. Whilst tenants can give just two months' notice to leave at any time, landlords must rely on Section 8 grounds for possession, which require specific reasons such as rent arrears, property sale, or the landlord moving in themselves. Many of these grounds are discretionary, meaning a judge must be satisfied that it is reasonable to grant possession.

The challenge? Court backlogs are already significant, with possession cases sometimes taking many months to resolve. Without the backstop of Section 21, landlords face greater uncertainty about regaining possession of their properties when needed.

New rules on rent increases

Under the new system, landlords can only increase rent once per year using a prescribed notice procedure. Tenants will have the right to challenge any rent increase at the Property Tribunal if they believe it exceeds market rates. Given that these challenges are free for tenants and can delay rent increases by several months, many experts predict that rent reviews will become more protracted and contentious.

The government has pledged to establish a mechanism to determine whether rent increases are within market rates before cases reach the property tribunal, but no timeframe has been provided for this system.

Pet ownership and discrimination protections

The Act introduces new anti-discrimination measures, including protections for tenants with children or those receiving benefits. Landlords will also no longer be able to impose blanket bans on pets. Instead, they must consider each request individually and can only refuse on reasonable grounds. Landlords will be able to request insurance to cover potential damage, but outright refusals will be difficult to justify.

Limitations on rent in advance

From the 1 May 2026 commencement date, landlords will be restricted in how much rent they can take in advance, particularly for student properties. Students can no longer be locked into rental agreements more than six months before the tenancy starts, which will significantly impact the traditional student lettings cycle.

What landlords should do now

With implementation just months away, preparation is critical. Here are the essential steps:

• Review existing tenancy agreements and understand that they'll automatically convert to periodic tenancies on 1 May 2026

• Ensure all compliance documentation is current and properly stored

• Plan any necessary rent increases to take place before the new rules come into force

• Serve any Section 21 notices before 30 April 2026 if you need to regain possession

• Familiarise yourself with the Section 8 grounds for possession and ensure you understand the evidence required

• Join a landlord ombudsman scheme, mandatory membership will be required by 2028

Using a comprehensive landlord app like August can help you navigate these changes by providing compliance checklists, automated reminders, and access to up-to-date regulatory information through August Intelligence.

Property market predictions for 2026

Despite regulatory pressures, the outlook for UK house prices in 2026 is cautiously optimistic. Most property analysts forecast moderate growth, with predictions ranging from 2% to 5% nationally.

National house price trends

Leading institutions point to national price growth of around 4 to 5% in 2026, with the average UK house price potentially exceeding £300,000 by year-end. However, this growth is expected to be uneven across the country, with regional variations creating different opportunities for investors.

London and the South East are forecast to see more subdued growth, with Greater London expected to remain flat (0%) in 2026 as the market digests recent tax changes. Higher-value properties, particularly those above £1.9 million, may see small price falls, though these could be offset by growth in the mainstream market.

Meanwhile, regions that have historically underperformed are catching up. The East Midlands, West Midlands, and North West are projected to see stronger growth, with some analysts predicting these areas will overtake London in cumulative price growth since 2010 by the end of 2027.

What's driving these trends?

Several factors are supporting modest house price growth:

Improving affordability: The base rate could drop to around 3.5% by mid-2026, with the average 5-year fixed mortgage rate potentially settling around 4.5% by year-end. This represents a significant improvement from the peaks of 2022-23, when rates exceeded 6%.

Wage growth: Real wages are growing ahead of inflation, improving purchasing power for many buyers. This gradual improvement in affordability is bringing buyers back into the market.

Supply constraints: Despite ambitious government targets to build 1.5 million homes, delivery remains well short of requirements. Persistent supply shortages continue to support prices, particularly in high demand areas.

Rental market dynamics

Whilst house price growth may be moderate, the rental market tells a different story. Rental values are expected to rise by 4% in 2026 in prime central and outer London, driven partly by landlords selling ahead of the Renters' Rights Act.

The exodus of landlords from the market is creating a supply squeeze. With the NRLA's landlord survey finding that 41% of landlords are likely to sell properties during 2026. This compared to just 19% in 2023-24, rental stock is declining precisely when demand remains strong the NRLA found. This imbalance is pushing rents higher across most regions.

For landlords who remain in the market, this creates opportunity. Higher rents can offset increased costs, whilst reduced competition from other landlords may mean better quality tenants and lower void periods. Properties that meet modern rental standards, particularly regarding energy efficiency, are commanding premium rents and letting faster than ever before.

Tax changes hitting landlords in 2026 and beyond

The tax burden on landlords continues to increase, with several changes taking effect in 2026 that will impact profitability.

Stamp duty changes

The stamp duty landscape shifted significantly in April 2025 when temporary reliefs expired. For buy-to-let mortgage investors and second home buyers, the changes are particularly costly:

The nil-rate band returned to £125,000, down from £250,000, and the surcharge on additional properties increased from 3% to 5% in October 2024. Together, these changes mean substantially higher upfront costs for property investment.

A landlord purchasing a £250,000 property now pays significantly more in stamp duty than they would have in early 2024. For a typical buy-to-let purchase, stamp duty costs can add thousands of pounds to the initial investment.

Property income tax increases from 2027

Whilst income tax rates remain unchanged for the 2025-26 tax year, a significant change looms. From April 2027, landlords will pay higher tax rates specifically on property income:

• Basic rate taxpayers will pay 22% (up from 20%)

• Higher rate taxpayers will pay 42% (up from 40%)

• Additional rate taxpayers will pay 47% (up from 45%)

These increases apply to rental income but not other forms of income, creating a new category of 'property income tax'. For unincorporated landlords with substantial rental income, this represents a further erosion of returns.

Capital gains tax considerations

The capital gains tax annual allowance remains at just £3,000 for 2025-26, down dramatically from £12,300 in previous years. However, the CGT rate for residential property sales held at 24% for higher and additional rate taxpayers, having been reduced from 28% in April 2024.

For landlords considering selling properties, timing matters. From 6 April 2026, incorporation relief against capital gains tax will no longer apply automatically and must be claimed, giving HMRC more visibility to challenge claims.

The Section 24 reality

Section 24 of the Finance Act continues to impact unincorporated landlords with mortgages. For higher and additional rate taxpayers, the inability to offset mortgage interest against rental income means paying tax on 'phantom profits' or income that's largely consumed by mortgage payments.

Many landlords are responding by transferring properties into limited companies, where corporation tax rates (19% to 25%) are more favourable than personal tax rates. However, incorporation comes with its own costs, including capital gains tax on the transfer and ongoing company administration expenses.

Strategies for managing the tax burden

To navigate these challenges, consider:

• Incorporation: For landlords with multiple properties and mortgage borrowing, operating through a limited company can offer significant tax savings, though professional advice is essential

• Spousal transfer: If your partner is in a lower tax band, transferring property ownership can reduce the overall tax liability

• Timing property sales: With CGT rates potentially changing, strategic timing of disposals can minimise tax exposure

• Claiming all allowable expenses: Use digital tools to track and claim every legitimate expense, from insurance and maintenance to mileage and professional fees

Energy efficiency requirements: the 2030 deadline

Whilst the requirement for rental properties to achieve EPC rating C won't take full effect until 2030, the groundwork starts much sooner, and landlords should be planning now.

The new EPC system launching in 2026

The government is overhauling how energy efficiency is assessed. From the second half of 2026, a new EPC methodology will be introduced, focusing on three key metrics:

• Fabric performance: How well the property retains heat through insulation, windows, and draught-proofing

• Heating system efficiency: Prioritising low-carbon systems like heat pumps

• Smart readiness: The building's ability to optimise energy use through smart controls

This represents a fundamental shift from the current system, which simply measures running costs. Properties that currently have an EPC C rating may find themselves downgraded under the new methodology, particularly older properties with poor insulation but relatively cheap gas heating.

Implementation timeline

The phased approach gives landlords time to prepare:

• 2026: New EPC methodology introduced

• 2028: All new tenancies must meet EPC C standard (using either old or new methodology)

• 2030: All tenancies must meet EPC C standard

Given that properties with existing EPC C ratings will be 'grandfathered' until their certificates expire (after 10 years), there's a strong incentive to obtain an EPC C now if your property is close to the threshold.

Cost caps and exemptions

The government has proposed a cost cap of £15,000 per property, meaning landlords won't be required to spend more than this amount on upgrades. There may also be an affordability exemption lowering the cap to £10,000 for some properties.

If you've spent up to the cap and still can't achieve EPC C, you'll be able to register an exemption, allowing you to continue letting the property.

What improvements make the biggest difference?

Focus on fabric first improvements:

• Loft and cavity wall insulation

• Draught-proofing and improved windows

• Upgrading heating controls

• Replacing old boilers with efficient alternatives

• Solar PV panels where suitable

Many landlords are getting ahead of the curve. According to recent surveys, 58.3% of landlords have already made eco-friendly upgrades, whilst 28.6% are specifically targeting EPC C compliance. Properties with better energy efficiency ratings let faster, command higher rents, and appeal to increasingly environmentally conscious tenants.

Making energy efficiency work financially

Whilst upgrades require upfront investment, they can pay dividends:

• Higher rents: Energy-efficient properties can command rent premiums

• Shorter void periods: Tenants actively seek properties with lower running costs

• Future-proofing: Avoiding the need for expensive last-minute upgrades

• Grant funding: Check for available schemes like the Boiler Upgrade Scheme

Use August's property insights feature to track your EPC ratings and expiry dates, ensuring you have ample time to plan any necessary upgrades.

Landlord licensing and the PRS database

Phase two of the Renters' Rights Act implementation includes the rollout of a Private Rented Sector (PRS) Database, beginning in late 2026 and continuing through 2028.

What the PRS database will include

All landlords will be required to register:

• Landlord and managing agent names, addresses, and contact details

• Property addresses and basic information

• Enforcement actions taken against them

• Previous eviction notices served to tenants

The database aims to increase transparency and help tenants make informed decisions about potential landlords. For good landlords, this should be a positive development, differentiating them from rogue operators.

Mandatory ombudsman membership

By 2028, all landlords must be members of a government-approved ombudsman scheme. This provides tenants with a route to resolve disputes without going to court, reducing costs and delays for both parties.

Getting ahead by joining a scheme early can demonstrate professionalism and may help resolve issues more quickly when they arise.

Managing HMOs in the new regulatory environment

For landlords operating Houses in Multiple Occupation, 2026 brings additional considerations. Many properties that landlords don't realise qualify as HMOs will come under greater scrutiny.

If you rent to three or more unrelated individuals who share facilities, you may be operating an HMO and subject to specific regulations including:

• Mandatory or selective licensing in most areas

• Enhanced fire safety requirements

• Stricter space standards

• More frequent inspections

The transition to periodic tenancies under the Renters' Rights Act creates particular challenges for HMO landlords. With room-by-room lets, coordinating the turnover of multiple tenants whilst maintaining occupancy becomes more complex when any tenant can leave with just two months' notice.

For detailed guidance, see our comprehensive guide on whether your property is actually an HMO and what this means for your obligations.

The bigger picture: buy-to-let investment in 2026

Given all these challenges, is buy-to-let still a viable investment in 2026?

The case for staying in the market

Despite the headwinds, there are compelling reasons to remain a landlord:

Strong rental demand: With homeownership increasingly out of reach for many, rental demand remains robust. The number of households renting privately continues to grow, and the exodus of some landlords is creating opportunities for those who remain.

High rental yields: With rents at record levels in many areas and house prices having moderated, rental yields in many regions are attractive. Properties purchased now with careful selection and proper management can generate strong returns. Also check out our rental yield calculator.

Inflation hedge: Property remains a tangible asset that historically performs well during inflationary periods. Whilst costs have risen, so have rents, and property values tend to increase over the long term.

Reduced competition: As nearly half of landlords consider selling, those who stay face less competition for tenants. Quality properties managed professionally are in high demand.

The case for caution

However, landlords must be realistic about the challenges:

• Regulatory complexity is at an all-time high

• Margins are tighter due to tax changes and increased costs

• Regaining possession has become more difficult

• Energy efficiency requirements will necessitate further investment

• Interest rates, whilst falling, remain well above historic lows

The winning strategy for 2026

Successful landlords in 2026 will be those who:

1. Professionalise their operations: Using comprehensive property management software to stay organised and compliant

2. Focus on quality: Providing well maintained, energy efficient properties that meet or exceed regulations

3. Build good tenant relationships: Viewing tenants as customers and providing responsive, professional service

4. Stay informed: Keeping up with regulatory changes through resources like the August blog

5. Plan ahead: Anticipating changes rather than reacting to them

6. Consider structure: Evaluating whether incorporation or other structures could improve tax efficiency

7. Select carefully: Choosing properties in areas with strong rental demand and growth potential

Making 2026 work for you

The year ahead will undoubtedly be challenging for UK landlords. The Renters' Rights Act represents the most significant reform in a generation, tax burdens continue to increase, and energy efficiency requirements loom on the horizon.

However, for landlords who embrace professionalism, invest in their properties, and use the right tools to stay organised, 2026 also presents opportunities. Rental demand is strong, rental yields are improving, and the departure of less committed landlords is creating space for those willing to provide quality accommodation and professional service.

The key is preparation. Start now by:

• Reviewing your portfolio and ensuring full compliance

• Planning for the commencement date 1 May 2026 implementation of the Renters' Rights Act

• Assessing your properties' energy efficiency and planning improvements

• Evaluating your tax structure and whether changes could improve your position

• Investing in systems and processes that make management easier

With August's all-in-one platform, you can manage compliance, track finances, communicate with tenants, and stay on top of every aspect of property management from a single app. August Intelligence provides instant answers to regulatory questions, whilst automated reminders ensure you never miss a critical deadline.

The future of landlording requires more professionalism, but for those willing to adapt, it remains a viable and potentially profitable investment. By staying informed, planning ahead, and using the right tools, you can navigate the changes ahead and build a sustainable, compliant, and profitable rental business in 2026 and beyond. For a recap of this year, read 2025 wrapped and also see what you need to know about Making Tax Digital n 2026.

Disclaimer: This article is a guide and not intended to be relied upon as legal or professional advice, or as a substitute for it. August does not accept any liability for any errors, omissions or misstatements contained in this article. Tax and legal rules can change and are different for different situations. Always speak to a suitably qualified professional if you require specific advice or information.