Allowable property expenses claimed by UK unincorporated landlords reached £34.75 billion in 2024/25, an 11% year-on-year increase, while declared rental income remained virtually flat at £58.99 billion. The gap is widening. Over four years, expenses surged 56% compared with just 26% income growth, according to HMRC's property rental income statistics published in 2026.
Average property income per landlord rose from £20,300 to £20,500 between 2023/24 and 2024/25. Average expenses climbed 12% to £13,700. That's £200 more income against £1,500 more cost per landlord. The arithmetic is blunt: net operating margins for the unincorporated landlord base are being structurally compressed, and the commercial consequences for agents, service vendors and the landlords themselves are already playing out.
Finance costs and repairs dominate the expense base
Residential finance costs accounted for £12.82 billion, representing 37% of all expenses claimed by 1.15 million landlords. The figure reflects higher interest rates through 2023 and 2024 and the continued impact of Section 24 restrictions, which prevent unincorporated landlords from deducting mortgage interest in full. For landlords who borrowed heavily or refinanced onto variable rates, finance costs now consume a larger share of gross rent than at any point in the past decade.
Repairs and maintenance produced the next largest bill at £6.41 billion, claimed by 1.92 million landlords—66.2% of the population. Legal, management and professional fees totalled £4.16 billion, while rent, rates and insurance reached £3.81 billion. The breadth of claims is notable: 87.7% of landlords reported at least one allowable expense, indicating active management or tax-efficient reporting. But the scale of cost inflation is outpacing any plausible efficiency gain.
Regional concentration and margin pressure
London and South East landlords represented 33% of the unincorporated population but accounted for 44% of declared income and 52% of expenses. The disproportionate expense ratio—52% of costs claimed by just 34% of landlords in those regions—points to higher borrowing levels, service costs and professional fees in the capital and surrounding counties. Portfolio landlords in these areas face the steepest margin compression and are likelier to model incorporation or disposal.
The data also highlights a large cohort of marginal operators. Around 1.3 million landlords—45% of the total—reported property income of £10,000 or less during 2024/25. Many of these are accidental or single-property landlords for whom further cost shocks, regulatory compliance burdens or void periods could tip viability into negative territory.
What the figures omit
HMRC's statistics exclude incorporated landlords, so the data cannot capture the scale of portfolio migration to limited company structures incentivised by the tax treatment of finance costs since Section 24 restrictions began phasing in from 2017. The flat income trajectory despite rising headline rents suggests either landlords are exiting, voids are increasing, or rent arrears are affecting declared income. The figures do not clarify whether income is gross rent or net of voids and irrecoverable costs, limiting precise margin interpretation.
The 56% expense growth is also not adjusted for changes in portfolio size. Landlord numbers rose from 2.81 million in 2020/21 to 2.88 million in 2024/25, a 2.5% increase. Per-property cost inflation is therefore likely steeper than the headline figure suggests. The data does not distinguish cash outlays from non-cash items such as capital allowances, and no sectoral breakdown—HMO, single-let, student accommodation—is provided, masking which landlord types face the greatest pressure.
Commercial implications for agents and vendors
Letting agents dependent on management fee income face clients whose net operating income is stagnating or falling. Expect pressure on fee structures, requests for cost reduction, and a higher rate of portfolio disposals among marginal landlords. Instruction pipelines may shift towards sales rather than lettings as landlords liquidate stock. Agents should model revenue scenarios in which unincorporated landlord numbers contract by 5–10% over the next two years.
Service vendors targeting unincorporated landlords are selling into a segment with constrained purchasing power. Tools that promise cost reduction—compliance automation, maintenance platforms, energy efficiency retrofits—may find traction, but discretionary upsell is limited. Vendors reliant on volume growth should watch incorporation rates and Companies House formation data closely. A significant shift to limited company structures would require revised distribution strategies and product positioning.
Accountants and tax advisers should expect more borderline viability cases and queries about incorporation timing. For landlords with significant borrowing, the tax efficiency of transferring portfolios to a limited company structure may now outweigh the transaction costs and stamp duty land tax implications. The decision hinges on individual circumstances, but the margin squeeze makes the analysis more urgent.