As we approach the biggest change in rental regulation of the past 30 years, many residential landlords – whatever their first intentions were when they embarked on their investment journey – will be reviewing whether to stick, hold or twist
Millions affected
There are plenty of them; data from HMRC tells us that in 2022–23, there were 2.84 million individuals declaring a property income for tax purposes. Some will hold their property as a married couple or with other family members to split their tax liability. Others will hold non-residential property, but the vast majority will be residential landlords.
In addition, there are those who hold their investments in more tax-efficient corporate structures, who are not captured by this data. While there is no definitive resource for measuring the ownership history and motives of residential landlords, the English Private Landlord Survey (EPLS) provides the best evidence available. It suggests that those corporate landlords could account for 8% of all current residential investors.
Correspondingly, there is a lot of investment wealth tied up in the sector, reflecting three quarters of the value of all shares on the FTSE 100. Our analysis suggests that there are 5.57 million homes in the private rented sector, worth an estimated £1.58 trillion in total.
Landlord intentions
The primary motivation for investing in financial assets, such as stocks and shares, tends to be straightforward; either to generate some kind of return, or at least to preserve existing wealth. When it comes to buy-to-let property, the first impetus for buying in is less clear-cut. Indeed, the EPLS suggests that 37% of landlords acquired their first rental property to live in themselves, rising to 50% of landlords who hold just one property.
And so, a lot of landlords will have started their investment journey by upsizing to a new home and keeping the property they moved out of as an investment (though to a lesser extent in recent times). A further 5% to 6% became landlords because they inherited or were gifted a property.
So, while a certain proportion of survey respondents will have fallen into property investment – some 16% became landlords for non-financial reasons – that hasn’t prevented the majority from refining their relationship with the sector. Again, the EPLS suggests that only 4.9% of landlords view their property as a temporary investment.
Holding patterns
Whether they are temporary or longer-term investors, the resolve of many landlords is being tested more than ever by the fiscal and regulatory environment in which they operate. In part, the intentions of those landlords will be dictated by the size of their portfolio and the level of debt they bear.
45% of landlords hold just one property and a further 37% between two and four, according to the EPLS; they represent smaller landlords, for whom the growing raft of regulation is a more daunting prospect, in line with more limited resources relative to their corporate peers.
But on the flip side, data from UK Finance tells us that only around 35% of private rented homes (1.94m) are subject to an outstanding buy-to-let mortgage. The EPLS suggests another 6% to 7% might be subject to a “conventional” mortgage.
These figures tally with data coming out of HMRC, which suggests that 42% of private individual landlords offset residential finance costs when submitting their tax return – still, the majority are debt-free.
Income and profitability
For the most part, this means that buy-to-let activity remains profitable for existing landlords, even if the regulatory burden is rising.
Data from HMRC, published earlier this year, shows that in 2022–23, private individual landlords generated a total table profit of over £25.6 billion on a turnover of £50.2 billion. With the average private individual landlord reporting a gross income of £17,665, this equates to an average profit of £9,021, having deducted finance costs of £2,799, among other elements.
Of course, averages hide quite a lot of variation. Where debt is more concentrated, average profits fall closer to £5,700.
But, that only tells part of the story; 51% of private landlords report gross income of less than £10,000. For those operating in this bracket, the decision about what to do next is mostly binary: hold or, increasingly, sell. Only the bravest are likely to expand in the current environment.
Perhaps surprisingly, less than 5% of private individual landlords report a gross income of over £50,000. While at this end of the scale, landlords are more likely to have incorporated the lettings business, they still receive around one-third of the gross property income received by private individuals. However, their options are broader, with the ability to restructure their portfolio to future-proof it, or in some cases, to build it up in light of opportunities arising from other players exiting the sector.
Restructuring businesses
And it is clear that some are already doing just this. Data from UK Finance shows that in the year to April 2019, the average size of portfolio for a mortgaged buy-to-let investor was 3.5 properties, whereas in the year to April 2025, this had risen to 5.0, with the gross yield they have bought into rising from 6.0% to 7.0%.
Recent stamp duty data shows that in the six months to the end of March, almost 111,000 purchases across England and Northern Ireland paid the recently elevated surcharge for additional homes. That is similar to the average levels of activity seen in the preceding five years. The main beneficiary has been the Treasury, for whom the revised surcharge level has raised just shy of £1.4 billion in the six months to the end of March.
This indicates that there remains a core of committed residential landlords on whom tenants are going to become increasingly reliant, as others review their continued investment in the sector.
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