Buy-to-Let in 2026: Will the Sector Continue to Grow Despite Tax Pressure and Rental Reforms?

Introduction

The buy-to-let (BTL) market is undergoing one of its biggest structural shifts in a decade. While more landlords than ever are incorporating, smaller landlords are exiting the sector. The key question for 2026 is whether the BTL market is shrinking — or simply evolving.

Limited Company Landlords Hit a 10-Year High

A total of 66,587 buy-to-let companies were incorporated in 2025, up 8% from 2024 and 363% higher than a decade ago, according to Hamptons. There are now 443,272 active buy-to-let companies — five times more than in 2016 when Section 24 mortgage interest relief restrictions were introduced.

Frozen income tax thresholds and higher mortgage rates have accelerated incorporation. Limited company landlords can offset mortgage interest fully and pay corporation tax (19–25%) instead of higher personal income tax rates.

Smaller Landlords Selling — Portfolio Landlords Buying

Investor purchases accounted for 10.8% of homes bought in 2025, down from 11.9% the previous year. However, portfolio landlords now account for over 50% of outstanding buy-to-let mortgages according to UK Finance data.

This suggests the sector is consolidating. Smaller landlords with one or two properties are exiting, while professional portfolio operators are expanding and acquiring stock.

Buy-to-Let Lending Rebounded in 2025

Despite negative headlines, UK Finance reported £38.1bn of new buy-to-let lending in 2025, up from £33.3bn in 2024 — a near 15% annual increase.

This rebound reflects renewed confidence among professional investors as interest rates stabilised.

Tax & Regulatory Environment

• Income tax thresholds frozen until 2031.

• Corporation tax up to 25%.

• 2% property income tax rise from 2027.

• Expanding selective licensing schemes.

• Upcoming Renters’ Reform legislation.

BTL Market Outlook for 2026

• Individual landlord numbers likely to decline further.

• Limited company landlord numbers expected to continue rising.

• Lending volumes stable or growing modestly.

• Rental supply remaining constrained, supporting rental values.

The buy-to-let sector is not collapsing — it is consolidating into a more professional and structured market.

Final Thoughts

The narrative that landlords are fleeing the market only tells half the story. Yes, smaller landlords are selling. But professional investors are expanding, limited company structures are rising, and lending has recovered. 2026 is likely to be a year of consolidation, not collapse.