The case for selling UK residential property

A changing landscape for landlords and property investors

Property has long been seen as a dependable investment option in the UK.  Many consider bricks and mortar a solid, tangible asset, and buy-to-let can provide a steady income stream. However, as with all investments, property has its pros and cons – and the list of drawbacks has been growing steadily over the last decade.

Rising taxes, tightening regulation and falling net yields mean the landscape has changed dramatically. For many landlords, diversifying away from UK property may now offer better long-term value, lower hassle and improved financial outcomes.

Key challenges facing landlords

A series of tax and regulatory reforms have increased costs, reduced tax efficiency, and introduced greater administrative and compliance burdens – making owning and letting out UK residential property significantly less attractive.  Many landlords, especially those living overseas, are finding that the risk–reward balance of property investment has shifted unfavourably.

Higher taxes

• Tax rates on rental income increase by 2 percentage points from April 2027, to 22% for basic-rate taxpayers, 42% for higher-rate and 47% for additional-rate taxpayers.
• The 40% mortgage interest tax relief was replaced by a flat 20% rate tax credit from April 2020.
• The additional stamp duty on second homes and rental properties introduced in 2016 increased from 3% to 5% from October 2024, with a further 2% surcharge for non-resident buyers.
• The favourable tax regime for furnished holiday lets was abolished from April 2025.
• The capital gains tax annual exemption was reduced from £12,300 in 2022 to £3,000 from 2024 (for both property and shares). On a positive note, the higher CGT rate on property was cut from 28% to 24% from 2024.
• Non-UK resident owners become liable to capital gains tax on UK residential property from 2015 and commercial property from 2019 – but only on gains made from those dates.
• UK residential property is now fully within the scope of inheritance tax, regardless of ownership structure.

Higher costs and lower net yields 

• Borrowing costs have increased with interest rates.
• Maintenance, labour and building material costs are rising, as are operating costs.
• Landlords need to spend more to meet regulatory and safety requirements.
• Older properties in particular may require significant upkeep.

Heavier regulation and lower flexibility

 The 2025 Renters’ Rights Act, to be implemented in stages from May 2026, is a fundamental shift in the private rental sector.

• Tenants will have increased protections.
• Section 21 no-fault evictions are abolished – landlords must now provide a valid reason to terminate a lease.
• Assured tenancies will become periodic rather than fixed-term – tenants can remain in the property until they choose to give two months’ notice.
• Rent increases will be limited.

Additionally, landlords face increased oversight, registration, ombudsman requirements and compliance checks.

More HMRC scrutiny, compliance and administrative burden

• Owning buy-to-let property now involves more intensive reporting obligations.
• Landlords will need to keep digital records and submit them quarterly (depending on
• rental income level), making it more time consuming and increasing accountancy costs.
• The likelihood of tax enquiries, penalties and retrospective assessments has increased.

Other potential disadvantages

• The risk of problematic tenants and property damage.
• Periods with no tenants, resulting in loss of rental income.
• The time, stress and administrative burden involved in managing a rental property.
• Significant transaction costs when buying or selling, which can erode returns.
• Property is an illiquid asset — accessing capital quickly is extremely difficult, and you cannot usually sell only part of it.
• The high initial capital outlay makes it challenging for many investors to achieve adequate diversification and manage investment risk effectively.

Why some investors are considering alternatives

These combined pressures have made it harder for even well-run letting businesses to achieve the returns seen a decade ago. Profit margins are tighter; risks are higher and administrative workloads heavier. Many landlords now conclude that the effort, cost and risk no longer justify the returns.

Non‑property investments can offer several advantages, including:

• The potential for higher long‑term returns.
• Tax‑efficient growth through ISAs, pensions, life policies or other wrappers.
• Freedom from tenant issues, maintenance responsibilities and property management demands.
• Generally lower running costs.
• High liquidity, making it easy to access funds and control how much you withdraw or sell.
• The ability to adjust your portfolio quickly as your circumstances or markets change.
• Greater diversification across asset classes, sectors and global regions to help manage risk in line with your risk appetite.
• Professional management with minimal day‑to‑day involvement required.
• The ability for assets to pass more smoothly to beneficiaries, often without the need for probate.
• More scope for effective tax planning, as portfolios of equities, bonds and real assets offer greater flexibility to manage income, capital gains and estate planning than immovable property.

A successful investment plan should be strategically designed around your specific situation, aims, time horizon and risk tolerance, as taking tax and estate planning into account. Contact Blevins Franks for professional, regulated advice to ensure your portfolio is suitable for you.

Extra considerations for British expatriates owning UK property

Whether you are a long‑term UK property investor or have kept a buy‑to‑let as an ‘anchor to home’, holding UK assets may not be in your best interests when living overseas for the long term.  As an expatriate, your tax responsibilities and planning become more complex — and the potential pitfalls increase — because you must comply with the tax rules of two jurisdictions.

The UK intends to participate in a new international automatic exchange of information agreement for real estate, due to start in a couple of years. It will impact anyone who does not correctly declare all property owned and rental income received outside their country of residence.

Rental income and capital gains on disposal typically need to be declared in both countries and can be assessed for tax in each.

Any UK property you own — along with all other UK‑situated assets remains subject to UK inheritance tax (IHT), no matter how long you have lived abroad. However, once you have been non‑UK resident for 10 years, your non‑UK assets fall outside the scope of IHT. This shift makes the case for selling UK property even stronger, particularly when your UK pensions begin to form part of your taxable estate next year.

Some countries, Cyprus for example, do not levy any local inheritance tax. In Portugal it is restricted to Portugal-based assets left outside your immediate family.  Spain and France both impose succession tax, calculated on each beneficiary – but many popular Spanish regions have effectively eliminated the tax for spouses and children, while spouses are exempt in France and each child benefits from a generous personal allowance.

Before selling UK property and reinvesting the proceeds, obtain personalised cross‑border advice. Blevins Franks will help you understand the full tax implications in both the UK and your country of residence, determine the optimal timing for a sale, and design an investment portfolio aligned with your objectives, circumstances and risk profile. We can also ensure you make full use of local tax‑advantaged investment structures — both for your own benefit and for the long‑term benefit of your heirs. Countries like France, Spain, Portugal and Cyprus offer investment structures that not only provide access to a broad and well-diversified portfolio, but also offer real tax advantages.

If you are undecided about selling property, Blevins Franks will help you weigh up your options. We’ll guide you through the complexities, comparing the benefits of real estate versus capital investments and calculate your potential tax liabilities and assess income and growth potential, to help you build a tailored investment and estate planning strategy.

Take the first step – get in touch today.