85% of landlords report profits despite yield concerns
Despite concerns that increased taxes would affect the profitability of the buy-to-let market and rental yields would stagnate, research suggests that most landlords reported profitable activity at the end of 2025.
According to an article from MoneyAge (3 February 2026), 85% of landlords said they were profitable in the final three months of 2025.
However, landlords do need to be mindful of challenges in the market. For example, from April 2027, the rates of Income Tax from property income will rise by two percentage points to 22%, 42%, and 47% for the basic, higher, and additional rates, respectively.
Indeed, the Office for Budget Responsibility (25 November 2025) noted: “The measures announced in this Budget [November 2025] reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns. This successive erosion of private landlord returns will likely reduce the supply of rental property over the longer run.”
Data from Zoopla (10 December 2025) also indicates that demand for rented homes fell by more than a fifth in 2025 to the lowest rate in six years. Over 2025, the average rent increased by 2.2%, compared to a rise of 3.3% in 2024.
Combined with rising tax liability, slowing rent growth could place pressure on landlords. Here are seven ways you might improve your profit margins.
1. Review your rental rate
Regular reviews of your rental rate could help identify potential opportunities to increase it. Be sure to consider how much similar properties in the local area are being rented for to avoid pricing your portfolio above the market, which could lead to a void period.
2. Analyse your expenses
Similarly, you might also want to review how much you’re paying for services such as property management fees or landlord insurance. There could be an opportunity to reduce these expenses if you shop around.
3. Update your property
Giving your property an update could make it more attractive to prospective renters, and it doesn’t have to cost a lot. If your updates mean you could increase the rental rate, it might be a worthwhile investment.
In some cases, a simple fresh lick of paint can make your home stand out from others on the market. You might also want to consider how to utilise the space to make the property more liveable. For example, adding cupboard space could make your property more appealing to families.
4. Weigh up creating a company
With tax liability set to rise in April 2027, now could be the perfect time to assess your current tax liability and how you might be affected by the changes.
In some cases, you could benefit from setting up a company for your portfolio, as it may reduce your overall tax liability. This option is usually most suitable for landlords with a medium- to large-sized portfolio.
An accountant could help you calculate if this option might be appropriate for you.
5. Consider changing how your property is let
The MoneyAge report noted that the pressure on landlords is “uneven”, with landlords operating houses in multiple occupation (HMO) being more resilient than those with traditional portfolios.
As a result, you might want to consider whether you could change how your property is let. Before making the changes, be sure to consider what type of property is in demand in your local area. In addition, you might need to make changes to the property in order for it to comply with HMO regulations, which may involve an initial investment.
6. Claim allowable expenses
If you’re not already claiming allowable expenses against your tax bill, doing so could increase your profitability.
For example, if your property required repairs for a leaky roof, you could offset this cost against your tax liability. Not all costs associated with your property are tax-deductible. For instance, you cannot use property improvements, such as installing a new kitchen, in the same way.
Again, speaking to an accountant could help you identify ways to improve your tax position.
7. Compare your mortgage options
Finally, the Bank of England has cut its base interest rate several times in the last year.
If your current mortgage deal is expiring soon, reviewing your options could secure you a more competitive deal. As mortgage advisers, we’re here to help you compare options and navigate the mortgage application process. Please get in touch if you have any questions.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.
Your property may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
The Financial Conduct Authority does not regulate tax planning.
