An annual portfolio review is where you stop being a collection of individual tenancies and start running a property business. Done properly, it answers four questions that decide your returns: which properties actually make money once tax and finance are stripped out, whether you are holding them in the right structure, whether your records will survive Making Tax Digital, and what to do with the laggards. This checklist works through each one in order, with the 2026 and 2027 rules built in rather than bolted on.
Set aside a morning after the 5 April year end, pull your figures together for each property, and work down the list. The point is not to admire a spreadsheet. It is to leave the review with a short, specific action list against every property you own.
Step 1: Recalculate the real net yield on every property
Most landlords know their gross yield (annual rent divided by value) and almost none act on net yield. Gross yield is close to useless for a leveraged portfolio because it ignores the very cost (mortgage interest) that Section 24 now taxes you on. Start the review by rebuilding the true picture for each property.
Work out net yield by taking annual rent and subtracting every running cost before you divide by current value:
- Letting or management fees
- Buildings and landlord insurance
- A realistic maintenance and repairs allowance, not last year's lucky low number
- Safety compliance: gas safety certificate, EICR electrical checks, EPC
- Ground rent, service charge or factor fees on leasehold flats
- A void provision (budget for the weeks a property sits empty between tenancies)
- The cash cost of mortgage interest
Rank the portfolio by net yield. The properties at the bottom are your disposal and refinance candidates for later in the review. While you are in the figures, look at the trajectory rather than the snapshot: a property where maintenance has crept from 8% of rent to 18% over three years is telling you something a single year's number hides. Check rent against current local market evidence on the portals before assuming you can push it; a rent rise that triggers a long void can wipe out the gain.
Step 2: Work out your effective tax rate after Section 24
Section 24 is fully in force. You can no longer deduct mortgage interest from rental profit. Instead you add the full profit before finance costs to your income, work out the tax, and then take a flat 20% basic-rate tax credit on the interest. For a basic-rate landlord that broadly mirrors the old relief. For a higher or additional-rate landlord it means tax on profit you never actually banked, and it can push your effective rate well above your headline band. Our complete guide to Section 24 sets out the mechanism in full.
A Section 24 worked example
Take a higher-rate landlord with £40,000 of rental income, £6,000 of allowable running costs, and £18,000 of mortgage interest, on top of an £80,000 salary.
| Step | Old rules (pre-Section 24) | Now (Section 24 in force) |
|---|---|---|
| Rental income | £40,000 | £40,000 |
| Less running costs | (£6,000) | (£6,000) |
| Less mortgage interest | (£18,000) | not deductible |
| Taxable rental profit | £16,000 | £34,000 |
| Tax at 40% | £6,400 | £13,600 |
| Less 20% credit on £18,000 interest | n/a | (£3,600) |
| Tax actually due on property | £6,400 | £10,000 |
Same property, same rent, same interest, but the tax bill rises from £6,400 to £10,000 purely because of how finance costs are treated. The real cash profit (£40,000 less £6,000 less £18,000) is £16,000, so the effective rate has climbed to 62.5% of genuine profit. That is why net yield, not gross, has to drive your decisions. For a longer treatment see our Section 24 worked example on a 50k portfolio, and check your own numbers against the Section 24 calculator.
While you have the figures open, confirm you are claiming everything legitimately deductible: use-of-home costs, mileage to properties, professional fees, and replacement of domestic items relief. Our full list of landlord tax deductions is a useful cross-check. Pension contributions can also extend your basic-rate band and pull more of your property profit into the lower rate.
Step 3: Test whether your ownership structure still fits
The structure that suited a two-property portfolio held alongside a basic-rate salary may not suit a six-property portfolio held alongside a higher-rate one. The review is the moment to ask whether you are still in the right wrapper, rather than drifting because changing is a hassle.
| Factor | Personal ownership | Limited company |
|---|---|---|
| Mortgage interest | 20% tax credit only (Section 24) | Fully deductible against company profit |
| Tax on profit | Your income tax band (rising to 22/42/47 on property income from April 2027) | Corporation tax 19% to 25% |
| Getting money out | It is already yours | Salary or dividend, taxed again on extraction |
| Moving existing property in | n/a | Triggers CGT and SDLT unless relief applies |
| Mortgage market | Wider, usually cheaper rates | Narrower, generally higher rates |
| Best fit | Lower leverage, basic-rate, income needed now | Higher leverage, higher-rate, profits reinvested |
Incorporation can restore full interest relief and cap tax at corporate rates, which appeals to a leveraged higher-rate landlord reinvesting rather than drawing income. The cost is real: transferring existing property into a company is a disposal for CGT and a purchase for SDLT, with the 5% additional-dwelling surcharge in England and Northern Ireland on top. Incorporation relief under TCGA 1992 s.162 can defer the gain where the lettings amount to a genuine business, but that is a fact-sensitive test, not a tick-box. Run it on your own portfolio before deciding, and read our guide to buy-to-let limited companies and the direct comparison in Section 24 versus incorporation.
If you already hold through a company, the review is also where you check extraction discipline. Watch the director's loan account: an overdrawn balance unpaid nine months after the year end attracts a s.455 charge at 35.75% for loans made on or after 6 April 2026. Our director's loan account mechanics piece covers the traps.
What the April 2027 rates mean for the decision
From 6 April 2027, property income in England, Wales and Northern Ireland is taxed at its own separate rates: 22% basic, 42% higher and 47% additional (Scotland sets its own income tax and is outside this change). This is enacted in Finance Act 2026, not a proposal. Critically, the Section 24 finance-cost credit rises from 20% to 22% in step, so for a basic-rate landlord the credit still matches the rate on property income and no new wedge opens. Higher and additional-rate landlords keep the same finance-cost gap they have now, simply shifted up by two percentage points. The change nudges the maths slightly towards companies for leveraged higher-rate landlords, but it does not transform it. Model it; do not assume it. Our 2027 tax-year planning guide works through the detail.
Step 4: Get the books ready for Making Tax Digital
Making Tax Digital for Income Tax is live and phased by income, so this is no longer something to park. It applies from 6 April 2026 where combined gross property and self-employment income exceeds £50,000, from 6 April 2027 above £30,000, and from 6 April 2028 above £20,000. Note that the threshold tests gross income, not profit, so a leveraged portfolio with thin margins can still be caught.
Use the review to:
- Confirm which threshold catches you and from which April
- Choose MTD-compatible software and connect your accounts
- Move to digital, quarterly record-keeping now, before your start date, so the first submission is routine
- Clean up the historic records you will be migrating, rather than carrying errors forward
Landlords who already keep tidy digital records have very little to do. Those still on a shoebox of receipts and a year-end spreadsheet have the most to gain from starting early. Our Making Tax Digital deadline guide for landlords sets out the practical steps.
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Step 5: Decide on disposals and refinancing, with the tax modelled first
Your net-yield ranking from Step 1 produced a shortlist of laggards. Now decide what to do with them, with the tax consequences worked out before you act, not after.
Capital gains tax on disposal
Residential property gains are taxed at 18% within your remaining basic-rate band and 24% above it, after your £3,000 annual exempt amount and allowable costs (purchase SDLT, legal fees, and genuine capital improvements such as an extension). You must report the gain and pay the tax within 60 days of completion through HMRC's UK Property Disposal service, separately from Self Assessment. Missing the 60-day window brings penalties, so build it into the timetable before you exchange. Our complete CGT on property guide covers reliefs, timing and the reporting mechanics.
A few timing points worth checking in the review:
- Spreading disposals across tax years uses two annual exempt amounts and can keep more of the gain in the 18% band.
- Transferring a share to a spouse or civil partner before sale is a no-gain, no-loss transfer that can use both partners' bands and exemptions on a later disposal.
- A low gross yield with strong capital growth is a different decision from a low yield with flat values; do not lump them together.
Refinancing and equity release
Rising values may have cut your loan-to-value, opening the door to a remortgage. Before you release equity, weigh the higher interest cost against the Section 24 restriction (extra borrowing only earns a 20% credit on the interest), early repayment charges, and arrangement fees. Releasing equity to buy a better-yielding property can make sense; releasing it to prop up a property that should be sold rarely does. See remortgaging a BTL under Section 24 for the tax treatment.
Step 6: Close out compliance and refresh the plan
The final pass is the unglamorous one that keeps you out of trouble. Work through it property by property.
Energy efficiency (MEES)
The current minimum is EPC band E. Since 1 April 2020 you cannot continue to let a domestic property rated F or G without a registered exemption, subject to the £3,500 (including VAT) landlord cost cap. Check every EPC's rating and expiry. The government has set out an intention to raise the minimum towards EPC band C later this decade, but no Statutory Instrument has been laid to make that law, so plan for it as likely future direction, not a current obligation. Where you do spend on insulation or heating to lift a property above the floor, note that genuine improvements add to your CGT base cost, while like-for-like repairs are a revenue expense.
Safety, deposits and licensing
- Gas safety certificate (annual) and EICR electrical inspection (at least every five years) current on every property
- Smoke and carbon monoxide alarms compliant
- Deposits protected in an approved scheme with prescribed information served; gaps here can block possession
- HMO licensing and any selective licensing in your areas confirmed; some councils require a licence for all lets in designated zones
Renters' Rights Act readiness
The Renters' Rights Act 2025 abolishes Section 21 no-fault evictions and moves tenancies to a periodic model, with provisions commenced in stages by regulations. Use the review to update tenancy agreements, tighten deposit and prescribed-information compliance, and make sure your management processes work without relying on Section 21. Confirm the commencement dates that bite on your properties rather than assuming a single switch-on date.
Geographic and structure-level risk
Standing back from the individual properties, check your concentration. A portfolio weighted heavily into one town or one tenant type (all students, all young professionals) carries more local-market and regulatory risk than a spread one. If you operate across borders, remember the transfer taxes differ: England and Northern Ireland use SDLT with the 5% additional-dwelling surcharge, Scotland uses LBTT with the 8% Additional Dwelling Supplement, and Wales uses LTT with its own higher-rate band structure. An acquisition you are weighing in one nation can carry a very different upfront cost in another.
Turning the review into an action list
The output of a good review is not a tidy spreadsheet, it is a short list of decisions with owners and dates: this property to sell next tax year, that one to remortgage, the company structure to model properly, the software to switch before MTD bites, the EPC to upgrade before the next void. A portfolio reviewed this way compounds; one left to drift quietly loses ground to tax and finance costs that a single morning a year would have caught. If your portfolio has grown past the point where an annual tidy-up is enough, that is usually the signal to bring in a property-focused adviser who can run the structure and disposal modelling alongside you. Our overview of what a property accountant does sets out where that help earns its keep.