The UK property investment landscape is undergoing significant transformation. After the pandemic introduced waves of uncertainty, the market has continued to face headwinds, from global geopolitical instability to inflationary pressures and fears of recession. Despite these challenges, a more stable horizon may be emerging, with the government signalling its commitment to increasing housing supply, reducing inflation, and creating steadier economic conditions through employment growth and interest rate moderation.
For landlords and investors, BTL and HBTL (holiday buy-to-let) markets are still viable, but the game has changed. Success now requires sharper strategy, better structure, and a deeper understanding of evolving regulation and tax treatment.
Limited Companies on the Rise
One of the most notable shifts in recent years has been the migration of landlords from personal ownership to limited company structures. This is largely in response to Section 24 of the Finance (No. 2) Act 2015, which has significantly reduced mortgage interest tax relief for individual landlords. In contrast, limited companies can still deduct finance costs in full, making them a more tax-efficient vehicle—particularly for portfolio landlords managing multiple properties.
Unsurprisingly, there’s been a noticeable uptick in limited company applications for BTL purposes, with the Vernon seeing an 88% year-on-year increase in 2024 of Limited Company BTL/HBTL mortgages. Investors are re-evaluating ownership models not just for tax efficiency, but also for long-term scalability and inheritance planning.
The Allure and Challenge of Holiday Lets
HBTL have also seen increased interest in recent years, driven by the potential for higher gross yields and the furnished holiday let (FHL) tax advantages. These include allowances for mortgage interest relief, capital allowances on fixtures and fittings, and potential capital gains tax reliefs such as rollover relief and business asset disposal relief.
However, several taxation changes came into effect on 6th April 2025, meaning investment into the HTBL market now requires more understanding and consideration. Meanwhile, local restrictions and planning constraints, especially in tourism-heavy regions like parts of Wales and coastal England, are beginning to bite. These factors could make new holiday let investments more complex, although demand for short-term rental accommodation in high-demand tourist locations remains strong.
Regulatory Reform on the Horizon
Investors also need to be aware of significant regulatory changes in the pipeline. The long-anticipated Renters Reform Bill is expected to come into effect by the end of 2025. Key changes include:
- The end of Section 21 ‘no fault’ evictions
- A move towards periodic tenancies as standard
- Higher minimum housing standards for rental properties
These reforms aim to rebalance the tenant-landlord relationship but will require landlords to adapt their management practices and ensure compliance.
A More Consolidated, Strategic Market
We are entering an era where the BTL and HBTL sectors are becoming more consolidated. Gone are the days where strong products alone were enough to secure success. The evolving tax and regulatory environment demand a more professional, structured approach to property investment.
Landlords and investors need to plan with foresight, factoring in tax strategy, compliance, location-specific restrictions, and tenant demand. Whether investing through a limited company, exploring the holiday let market, or navigating rental reforms, the future of property investment will reward those who take a considered, long-term view.
Brendan Crowshaw is head of mortgages and savings distribution at Vernon Building Society
