The additional 2% tax on income from property announced by the Chancellor in the November Budget has been the final straw to tip the commercials unfavourably for many buy-to-let businesses.
Having already been squeezed by Section 24 mortgage interest restrictions, which used to enable deduction of mortgage interest from rental income before calculating tax, the new separate ‘property’ tax bands of 22%, 42% and 47% have made many portfolios unsustainable.
Whilst this article is in no way providing financial advice, it is unsurprising that Thackray Williams is receiving a raft of enquiries from PRS landlords holding rental properties in their own name, for whom every pound of taxable rental profit earned after April 2027 will attract 2 percentage points more income tax than it does today.
They’re looking for advice on how to end their residential tenancy agreements – but there is a very loud ticking clock adding urgency to these discussions. With the PRS set to be significantly transformed when many of the key provisions of the Renters’ Rights Act 2025 (the ‘Act’) come into force on 1 May 2026, landlords who are rethinking their portfolios have tight deadlines to hit – not least the need to serve Section 21 (no fault) eviction notices before they are abolished in May.
The timetable of the Renters’ Rights Act
The Act will be implemented in three phases:
· Phase 1: The majority of the tenancy reforms will take effect from 1 May 2026. This includes: the abolition of section 21 notices (no fault evictions); the introduction of amended grounds for possession; the abolition of Assured Shorthold Tenancies (ASTs) with both existing and new tenancies moving to Periodic Assured Tenancies (PATs), with transition arrangements for existing
tenancies; the limitation of rent increases; the introduction of anti-discrimination measures; and the right to request permission to keep a pet.
· Phase 2: The PRS database and the landlord redress scheme (referred to as the Landlord Ombudsman) will be introduced from late 2026.
· Phase 3: the Decent Homes Standard and Awaab’s Law will be extended to the PRS. The dates for these provisions will be settled following consultation.
PRS landlords’ concerns arise from the fact that on 1 May 2026, ASTs in England will convert into PATs. This means that any fixed terms will end, and the tenancy will be periodic, rolling from month to month until either the tenant or the landlord terminates it.
The converted tenancy will be treated as one continuous tenancy, and landlords will not need to re-serve compliance documents, such as Gas Safety Certificates, Electrical Installation Condition Reports and Energy Performance Certificates upon their tenant, nor will they need to re-register tenancy deposits.
The deadline to service Section 21 notices
There are two categories of ASTs which will not become PATs on 1 May 2026; firstly, where there is a valid pending Section 21 notice, or, secondly, where there is a valid pending Section 8 notice to start eviction proceedings when the tenant has breached the tenancy. As the Act is abolishing Section 21 Notices, which are no-fault evictions, these will be the main focus of this article.
To be a valid Section 21 notice, a landlord:
· Cannot serve during the first four months of the tenancy (unless the tenancy is a replacement tenancy under section 21(4B) of the HA 1988, when the four-month period is calculated by reference to the start of the original tenancy, not the replacement tenancy).
· Cannot serve where a landlord is prevented from retaliatory eviction under section 33 of the Deregulation Act 2015;
· Must have provided the tenant with an EPC certificate;
· Must have provided the tenant with a gas safety certificate;
· Must have provided the tenant with the official government guidance ‘How to rent: the checklist for renting in England’;
· Must have complied with the tenancy deposit scheme legislation.
Paragraphs 3 and 4 of Schedule 6 of the Act prescribe that a valid Section 21 notice served before 1 May 2026, will remain valid, and the tenancy will remain an AST until the landlord obtains possession and the tenancy ends, the notice lapses or a judge decides that the notice is invalid. Rules for Section 8 notices are to be found in Paragraphs 16 and 17 of Schedule 6 of the Act.
Accordingly, tenancies will not be subject to the rules in Chapter 1 of Part 1 of the Renters’ Rights Act, as long as they remain ASTs.
If a landlord has not filed court proceedings by 1 May 2026, they must do so by asking the court to issue a claim form by the earlier of 31 July 2026 or the expiry of the notice. Section 21 notices expire 6 months after service, and a Section 8 notice expires 12 months after service.
If a landlord fails to obtain possession because the notice served has lapsed or was not valid, the tenancy will become a PAT.
Additional difficulties in obtaining possession after the implementation of the Act
The reason it will become harder for PRS landlords to obtain possession after the implementation of the Act is that the following clauses in all existing tenancy agreements will become null and void, and unenforceable, from 1 May 2026:
· Fixed term clauses: Any dates specifying a fixed term (eg “for a term of 12 months”) will have no effect. The tenancy will become a PAT on 1 May 2026, and any attempt to enforce a fixed term may lead to a civil penalty under the new Section 16E of the Housing Act 1988 (HA 1988) that will be introduced by Section 13 of the Act.
· Break clauses: These will be redundant. Tenants will be able to end the tenancy at any time with two months’ notice to expire at the end of a rent period, and landlords will only be able to terminate if they have a valid Section 8 ground.
Other key provisions of the Act
The Act will also forbid:
· Contractual rent review clauses: Any clause that states how a rent increase will be calculated, for instance by reference to CPI or RPI, will be null and void. Landlords will only be able to validly increase rent by using the statutory Section 13 process (a Form 4A), and only once every 12 months.
· Blanket pet bans: A clause prohibiting pets will be subject to the new implied term that the landlord cannot refuse to give consent, unless they have a good reason, provided the tenant follows the procedure set out in Section 11 of the Act.
· Rent Periods exceeding one month: If the AST states rent is payable quarterly or annually, this will become a monthly rent period using the formula in Formula in Section 1(6) of the Act.
Section 3 and Schedule 1 to the Act amend and widen some of the grounds for possession in Schedule 2 of the HA 1988, and amend some of the notice periods that apply to different grounds for possession. These grounds for possession will have even greater significance due to the abolition of Section 21.
For example, a landlord who wishes to sell their buy-to-let property will now be required to provide a minimum of four months’ notice. If their tenant does not vacate after the notice period ends, the landlord is required to file possession proceedings. Most PRS landlords know from bitter experience that it can take a further nine months before the court awards possession, and often tenants will not vacate until the possession order is enforced by a warrant, leading to further delays.
The Act does not include a mandatory ground for repeated serious arrears of rent. Unless the landlord can rely on Ground 8 (which is mandatory but includes a high threshold of three months’ arrears and a notice period of four weeks), the landlord will need to seek possession for arrears on one or more of the discretionary grounds.
What this means for landlords wishing to recover possession
To recover possession in June/July 2026, PRS landlords should serve a Section 21 notice well before the deadline of 1 May 2026. This is because the transitional provisions in Para 4 of Schedule 6 allow Section 21 notices served before 1 May 2026 to remain valid for their usual lifespan (typically allowing proceedings to be brought within six months of service), so long as the landlord applies to the court for a claim form to be issued by 31 July 2026.
When serving a section 21 notice, landlords should ensure:
· The section 21 notice is in the correct form
· The best method of service in accordance with the terms of the tenancy agreement
· Sufficient time is allowed for the notice to be served
Landlords should additionally consider:
· Whether any copies of the notice should be sent addressed to “The Occupiers” or to any other person who is not named as a tenant on the tenancy agreement
· Obtaining proof of service
After the section 21 notice has been served, the landlord must:
· Diarise any deadline for commencing possession proceedings
· Continue to demand rent; the tenancy will continue until a possession order is enforced (section 5(1A), HA 1988).
Ensuring compliance as you recover possession – other legal considerations
Landlords must not evict their tenant without obtaining a court order.
Where the landlord is using the procedure under section 21, it does not need to rely on any of the grounds for possession under section 8.
If the accelerated possession procedure is used, the landlord can claim possession only, not rent arrears. If there has been a default in complying with the tenancy deposit scheme rules, the accelerated possession procedure may not always be able to be used.
If the landlord wishes to recover possession and to apply for any other relief, such as seeking a judgment for rent arrears, the standard possession procedure must be used.
An Order for possession cannot take effect any earlier than six months after the beginning of the original tenancy.
Landlords wishing to retain their current tenants will not need to reissue tenancy agreements when the new PASs come into force on 1 May 2026. Instead, they will need to provide their tenants with the official government “Information Sheet” by 31 May 2026. The Information Sheet explains the tenancy reforms and will be published on GOV.UK in March 2026.
Conclusion
Professional and accidental landlords will already be aware of the need for compliance across their portfolio management, but the requirements are going to be tighter and less flexible once the Act comes into effect.
Taking expert advice to ensure you operate within the terms of the complex laws will reduce the risk of your plans becoming derailed so that you can optimise your portfolio to support your commercial and personal goals.
