Being a landlord in Harrow, Edgware, or Wembley has become significantly more complicated from a tax perspective. Between Section 24 mortgage interest relief restrictions, reduced capital gains tax exemptions, and the arrival of Making Tax Digital, landlords who don’t take a structured approach are paying more tax than they need to, or worse, making errors that attract HMRC attention.
Here is the complete picture for 2026.
Section 24 – Mortgage Interest Relief Restriction
This is the change that has hit many Harrow landlords hardest. Since 2021, landlords who own property in their personal name can no longer deduct mortgage interest directly from their rental profits. Instead, they receive a basic rate tax credit (20%) on their mortgage interest payments.
For higher rate taxpayers, this effectively means paying 40% tax on rental income and getting only 20% back on the interest — a net 20% on costs that used to be fully deductible. For additional rate taxpayers, it is even more painful.
What this means in practice: A landlord with £18,000 rental income and £10,000 mortgage interest costs no longer shows a £8,000 profit. They show an £18,000 profit and then claim a £2,000 tax credit. A higher rate taxpayer in this situation pays £7,200 tax and gets £2,000 back – net £5,200. Before Section 24 they would have paid £3,200. That’s a £2,000 annual increase per property.
If you haven’t modelled the full impact of Section 24 on your portfolio, it is worth doing urgently.
Rental Income – Self-Assessment Obligations in 2026
If you receive rental income at all, you must declare it through Self-Assessment. The £1,000 property income allowance only applies to very minor letting arrangements.
Additionally, from April 2027, landlords with qualifying income over £30,000 will be brought into Making Tax Digital for Income Tax (quarterly digital reporting). Landlords with income over £50,000 are already in scope from April 2026. Planning ahead now avoids a last-minute scramble.
Capital Gains Tax on Residential Property in 2026/27
If you sell a rental property, Capital Gains Tax applies to the gain. The key figures for 2026/27:
- Annual CGT exempt amount: £3,000 (reduced from £12,300 just three years ago)
- Basic rate taxpayer CGT on residential property: 18%
- Higher rate taxpayer CGT on residential property: 24%
The annual exempt amount has been cut so significantly that almost any gain on a rental property sale will now be taxable. For a property bought for £200,000 and sold for £350,000, a higher rate taxpayer faces CGT of approximately £35,280 after the exemption – a significant liability that needs advance planning.
Useful Reliefs That Still Apply
Private Residence Relief (PRR): If you ever lived in the property as your main home, the period you lived there (plus the final 9 months of ownership) is exempt from CGT. Keep records of occupation.
Letting Relief: Now very restricted – only applies where you shared occupation of the property with a tenant. Not relevant for most buy-to-let landlords.
Rollover and Holdover Relief: Available in certain circumstances, particularly for incorporated landlords.
Losses: Losses on property sales can be offset against other capital gains in the same tax year or carried forward.
Should You Incorporate Your Property Portfolio?
Many Harrow-area landlords are asking this question. Incorporating can restore full mortgage interest deductibility (companies are not subject to Section 24) and allows profits to be retained in the company at the 19% or 25% Corporation Tax rate rather than being taxed at 40% or 45% personally.
However, incorporation is not straightforward. The transfer of properties to a company is itself a CGT event and may trigger Stamp Duty Land Tax (SDLT). The decision requires careful modelling based on your specific portfolio, mortgage position, and long-term plans.
I advise landlords across Harrow, Stanmore, and Wembley on property tax strategy – from self-assessment filing through to incorporation analysis. Email me to discuss your situation.
📧 info@yourtaxhelp.co.uk | 📞 07478 645331
Your Tax Help Accountants — Stanmore, London