More landlords could move their property portfolios into limited companies following tax changes announced in the Budget, according to the Intermediary Mortgage Lenders Association (IMLA).

In its report, The October 2026 Budget: Impact on the housing and mortgage markets, IMLA said the government's decision to raise tax rates on rental income by a further 2% from 2027/28 would widen the gap between individual and corporate landlords.

Under the changes, the rates of tax on rental income for individual landlords will rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers. The increases do not apply to rental profits generated through limited companies, which are instead subject to corporation tax.

IMLA said the changes could hit mortgaged landlords particularly hard because mortgage interest can no longer be fully deducted when calculating taxable income. According to its analysis, a higher-rate taxpayer could face an effective tax burden equivalent to 74% of rental profits on a typical mortgaged property, rising to 86% for an additional-rate taxpayer.

In some cases, the impact could be even more severe. For landlords earning between £100,000 and £125,140, where the personal allowance is gradually withdrawn, the effective rate of tax on rental profits could exceed 100%, meaning some investors could pay more in tax than they generate in profit.

Despite the increased tax burden, IMLA does not expect an immediate exodus from the buy-to-let (BTL) market. It thinks investment decisions would continue to be influenced by factors including borrowing costs, rental yields, expected house price growth and the costs associated with selling or restructuring property portfolios.

However, the trade body believes the growing tax advantage enjoyed by corporate landlords is likely to accelerate the long-term shift towards limited company ownership.

Transferring existing properties into a company can trigger both stamp duty and capital gains tax (CGT) liabilities, meaning many landlords may choose to retain their current holdings personally while purchasing future investments through a corporate structure instead.

The implications for tenants remain uncertain. While individual landlords still account for the vast majority of the private rented sector, IMLA noted that properties sold by private landlords do not necessarily leave the rental market, as they may be purchased by other landlords, institutional investors or corporate operators. As a result, any decline in individual landlord ownership would not automatically lead to a corresponding fall in rental supply.

Kate Davies, executive director of IMLA, 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.

“For tenants, the concern is whether enough suitable homes remain available where they need them and at rents they can afford. Investment by both individual and corporate landlords contributes to that supply. Policy needs to support a sustainable rental market which recognises the range of households who rely on it, including those for whom homeownership is currently – and is likely to remain - out of reach.”

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