Landlords are being urged to reassess their investment strategies following the latest Budget tax increases, according to a report by the Intermediary Mortgage Lenders Association (IMLA).

IMLA analysis warns that higher taxes on rental income could make property ownership increasingly challenging for individuals holding buy-to-let properties in their own names.

The report, The October 2026 Budget: Impact on the housing and mortgage markets, examines how a further two percentage point increase in tax on rental income could change landlords’ decisions.

One option is to accelerate the shift towards property ownership through limited companies, IMLA found.

The tax increase increase, announced in the October Budget, follows a rise introduced last year and will take the basic, higher and additional rates of tax on rental income to 24%, 44% and 49% respectively from the 2027/28 tax year.

The changes will apply to individual landlords but not to rental profits generated through limited companies, which are subject to Corporation Tax.

For landlords with mortgages, the financial impact could be large. Mortgage interest can no longer be deducted in full when calculating taxable rental income, with landlords instead receiving a basic-rate tax credit.

IMLA’s example calculations show that a landlord with a £250,000 property and a £150,000 mortgage could currently make annual rental profit of £4,365 before tax.

From 2027/28, a higher-rate taxpayer below the personal allowance withdrawal threshold could pay tax equivalent to approximately 74% of that profit.

For an additional-rate taxpayer earning more than £130,000, the effective figure rises to around 86%.

The position could be even more challenging for landlords earning between £100,000 and £125,140, where the personal allowance is progressively withdrawn.

In IMLA’s example, a landlord with a £100,000 salary could end up losing money and paying tax equivalent to 124% of their rental profit.

Despite the increased pressure on returns, IMLA cautions against assuming that landlords will automatically respond by selling their properties.

Investment decisions will also depend on mortgage borrowing, local rental yields, expectations for house price growth, investment timescales and the tax costs associated with disposing of a property, the trade body’s report found.

However, the widening difference in tax treatment between individual and corporate ownership could encourage more landlords to purchase properties through limited companies, the report said.

Transferring existing properties into a company structure is not necessarily straightforward, as landlords may face Stamp Duty and Capital Gains Tax liabilities. Some could therefore choose to sell properties held personally before acquiring new investments through a company.

IMLA highlights that individual landlords accounted for 81% of tenancies in the English Private Landlord Survey 2024. At the same time, the number of mortgaged buy-to-let properties fell by 157,000 between November 2022 and August 2026.

However, the association warns that a reduction in properties owned by individual landlords does not necessarily translate into an equivalent reduction in rental housing supply.

Properties sold by private landlords may be purchased by other investors, including landlords operating through limited companies, and subsequently added to corporate portfolios.

The overall effect on tenants will therefore depend on the extent to which investment continues across both individual and corporate ownership structures.

Kate Davies, executive director of IMLA, said landlords would respond differently depending on their financial circumstances and investment objectives.

Davies said: “Landlords will respond differently to these changes, depending on their financial circumstances and what they want from their investment.

“Some will continue to see a strong case for holding property over the long term, particularly where they anticipate capital growth. Others may decide that lower rental income, alongside their wider costs and commitments, changes that calculation.

“Company ownership can offer a suitable structure for investment, including for those planning to pass their investment properties down to their children, but existing landlords also have to consider the costs of restructuring or selling. Understanding those choices is essential to assessing how the Private Rented Sector will develop.”