Mid-year tax planning for landlords: Balancing current tax efficiency with Inheritance Tax and succession planning

With the 2026/27 tax year now well underway, now is an ideal time for landlords to review their tax position, to identify any planning opportunities while there’s still time to act, and to ensure your property portfolio is supporting your longer-term financial goals.

Against a backdrop of rising costs, increasing mortgage interest rates and increased tenant protections coupled with an ever-changing tax landscape, it is essential for landlords to minimise cash leakage where possible to continue to build wealth.

Review your expected rental profits and cash flow

A good starting point is to compare your rental income and expenditure against your existing budget or last year’s figures. If profits are higher than anticipated, you may want to consider whether making additional pension contributions (subject to earnings restrictions) or bringing forward planned repairs could improve your overall tax position.

It’s also worth checking that you’re claiming all allowable expenses, and that repairs and capital improvements are being treated correctly for tax purposes.

However, profit doesn’t always translate into available cash. Rising maintenance costs, mortgage repayments, tax liabilities and periods of vacancy can all affect cash flow. Forecasting can help you to avoid unnecessary financial pressure and ensure that you’re setting aside sufficient funds for tax payments and planned expenditure.

Whilst the interest element on mortgage repayments gives some element of tax relief, the capital element attracts no tax relief resulting in a discrepancy between cash and profit. This can make it attractive to switch to interest-only mortgages or leverage debt against commercial properties to limit the impact of this cash flow cost.

Consider any planned property sales

If you’re thinking about selling one or more of your rental properties this year, careful consideration should be given to the likely Capital Gains Tax (CGT) position, allowable costs and how the timing of the sale may impact your tax liabilities.

Taking early advice in relation to tax planning, before you initiate any disposals, can help you to ensure you have utilised planning opportunities that might otherwise disappear once a sale has been completed.

Check your ownership structure

Another important thing to consider is your ownership structure, and whether this is still aligned with your objectives.

What may have worked when you first made your investment may no longer be the most efficient structure when you account for portfolio growth, or other changes in circumstance.

Whether properties are owned personally, jointly or through a company can have significant implications for income tax, Capital Gains Tax, succession planning and future flexibility.

Whilst corporate ownership has become a topic of conversation amongst landlords, it can have longer term tax implications, as well as initial incorporation costs such as Stamp Duty Land Tax and Capital Gains Tax. Managing these incorporation costs is essential to ensure that the longer-term structure is fit for purpose.

Don’t overlook succession and Inheritance Tax planning

For many landlords, their property portfolio is one of their largest assets. While attention often focuses on annual tax savings, the potential Inheritance Tax (IHT) liability can be far more significant.

With tax free allowances being frozen since 2009, the increase in property values since that time has left more landlords exposed to IHT. Together with upcoming changes to the IHT treatment of inherited pension schemes there are expected to be increasing numbers of estates within the scope of IHT.

Therefore, although every family’s circumstances are different, factoring in longer-term plans and wishes can be equally important. Overlooking succession and IHT planning is all too common, often resulting in issues with passing on assets, or indeed assets and wealth being depleted by large tax bills.

Consider the following:

• Do you have a valid Will, and is it up to date – i.e., does it reflect your current financial position and wishes? Keeping your Will up to date is an essential step in ensuring your estate, assets and wealth can be passed on in the most tax efficient way.
• Do you know the current value of your estate, including your property portfolio? Calculating your tax exposure and undertaking confident planning becomes difficult without knowing exactly what your portfolio is worth.
• Are your intended beneficiaries aware of your plans? It’s important that those who will inherit your assets are aware of your portfolio and intentions. This will enable them to manage assets effectively, to understand the impact on their own tax position and to consider the necessity for any post-death restructuring.
• Does your ownership structure still support your succession objectives? If your circumstances have changed since your initial investment, it may be time to revisit how property is owned. It could also be prudent to consider whether involving the next generation in the business or management of the portfolio may support your succession plans.
• Have you considered whether lifetime gifting could form part of your long-term strategy, and are there opportunities to make use of available exemptions over time? Both can be effective ways of reducing your taxable estate and ensuring your property portfolio does not need to be sold in order to satisfy IHT liabilities However the short-term tax implications of making gifts of property need to be considered carefully.

Many landlords assume their family will simply inherit the portfolio intact, but without planning, beneficiaries may face significant tax liabilities or be forced to sell assets to meet them.

Planning works best when it’s done early

By reviewing your position now, and at regular intervals throughout the tax year, you give yourself time to make significant decisions and to implement changes that align with your financial objectives and long-term goals.

Whether you’re looking to improve tax efficiency, prepare for future property sales or start thinking about passing your portfolio to the next generation, with a joined-up approach we can help you to ensure your property investments continue to work for you, and your family, now and in the future.

To talk to our team of experts about anything from reviewing your ownership structure, planning for future disposals or understanding your potential IHT exposure, to drafting a Will that reflects your wishes, please get in touch.