The London private rental market has entered a pivotal year. With the Renters' Rights Act 2026 now in force since 1 May, the limited company SPV route accounting for around 80% of new buy-to-let purchases, and outer East London delivering gross yields approaching 5–6.5%, informed investors are finding that the fundamentals still stack up — provided the structure is right. IREIS Properties works with buyers looking to build a resilient London portfolio through carefully selected new-build developments.
This guide cuts through the noise: what yields look like across different London zones in mid-2026, why most professional landlords are now buying through a Special Purpose Vehicle (SPV), and what the Renters' Rights Act means for your day-to-day operations.
Key Takeaways
Outer East London boroughs (Newham, Barking & Dagenham) are delivering gross yields of 5–6.5% on new-build stock in 2026 — figures are approximate and subject to market conditions.
Around 80% of new BTL purchases in the UK are now made through limited companies (SPVs), primarily due to Section 24 mortgage interest restrictions for individual landlords.
The Renters' Rights Act (in force 1 May 2026) abolishes Section 21 ‘no-fault’ evictions and replaces fixed-term tenancies with rolling periodic contracts.
A PRS landlord database launching late 2026 will require registration — factor compliance into your investment timeline.
What This Guide Covers
Rental Yield Map
Compare gross and net yields across London zones, from 2.5% in prime central to 6.5% in outer East.
SPV Tax Advantage
How buying through a limited company restores full mortgage interest deductibility and lowers tax drag.
Regulatory Readiness
Key obligations under the Renters' Rights Act 2026 that every BTL landlord needs to understand now.
Rental Yields Across London Zones in 2026
London's rental yield map in 2026 reveals a city of two halves. Prime central zones — Westminster, Kensington and Chelsea — offer gross yields of roughly 2.5–3.5%, where capital appreciation historically does the heavier lifting. Move east, and the picture changes sharply. Newham, Stratford and the Olympic Park corridor offer gross yields of approximately 4.5–5.5% on new-build stock, underpinned by strong Crossrail / Elizabeth line connectivity and a concentration of young professional renters. Barking and Dagenham, now firmly on the regeneration map, is approaching 6.5% gross in some postcodes according to current market data.
Gross yield is, however, only the starting number. A realistic net yield calculation must subtract: letting agent fees (typically 10–15% of monthly rent), service charges (often £2,000–£4,000 per year on new builds), maintenance provisions and void periods. Net yields typically run 1.5–2 percentage points below the gross figure. Past performance is not a guide to future returns; all yield figures are approximate and subject to market conditions. IREIS Properties helps clients model net yields before committing to a reservation, using actual service charge schedules from developers.
Buying Through a Limited Company (SPV)
Under Section 24 of the Finance Act 2015, individual landlords can no longer deduct mortgage interest from rental income as a business expense. Instead, a 20% basic-rate tax credit applies — a significant disadvantage for higher-rate (40%) and additional-rate (45%) taxpayers who previously benefited from full deductibility.
A UK Special Purpose Vehicle (SPV) — a limited company set up solely to hold property — sits outside Section 24. The company can deduct 100% of mortgage interest before calculating profit, and profits are then taxed at corporation tax rates (currently 19–25% depending on profit level). This is why approximately 80% of new BTL purchases are now made through the limited company route.
The trade-offs are real, however. Limited company buy-to-let mortgages typically carry higher interest rates than personal ones. Additional costs include: incorporation, annual accounts and corporation tax filing, and extracting profits via salary or dividends. For a portfolio of three or more properties held by a higher-rate taxpayer, the SPV route generally becomes tax-advantageous over time, though the recovery period varies with individual circumstances. IREIS Properties strongly recommends consulting a qualified UK tax adviser before deciding on ownership structure.
The Renters' Rights Act 2026: What Landlords Must Know
The most significant change to England's private rental sector in a generation took effect on 1 May 2026. Here are the key points for every buy-to-let landlord:
Section 21 is abolished. You can no longer use a ‘no-fault’ notice to end a tenancy. All possession proceedings now require a Section 8 notice citing specific statutory grounds.
Fixed-term tenancies replaced by rolling periodic contracts. All new tenancies are periodic from the outset — there are no more fixed initial terms. Existing tenancies transitioned automatically on 1 May 2026.
Rent increases require a Section 13 notice. Landlords must use the formal notice procedure; tenants retain the right to challenge proposed increases through the First-tier Tribunal.
Pet requests must be properly considered. Tenants have the right to request a pet; landlords must assess requests fairly and cannot refuse without reasonable grounds.
PRS Landlord Database (late 2026). A new Private Rented Sector database will require landlords to register themselves, their properties and compliance information, rolling out regionally from late 2026. A PRS Landlord Ombudsman with mandatory sign-up follows in 2028.
For new-build investors, this legislation brings a structural advantage: new-build developments with modern specifications, professional lettings management and robust tenancy documentation are best positioned for the post-Section 21 landscape. IREIS Properties selects new-build developments with precisely this management quality in mind.
“In a post-Section 21 landscape, professionally managed new builds are a structural advantage for the modern BTL landlord — not merely a preference.”
Selecting a New-Build BTL Property in 2026
Not all new builds are equal from an investor's perspective. IREIS Properties advises clients to focus on four criteria when assessing a development:
Transport connectivity. Proximity to Crossrail, Jubilee or Northern line stations drives tenant demand more than almost any other factor. Zone 2–4 developments within ten minutes' walk of a high-frequency service command a meaningful rental premium.
Developer covenant strength. Ensure the developer is financially sound. Use the building safety certificate and NHBC warranty as a baseline — and look at the developer's track record on similar completed schemes.
Service charge trajectory. Request the managing agent's service charge history. Some developments see charges escalate sharply in years three to five; factor this into your net yield model.
Exit liquidity. Consider the depth of the resale market. Large single-block schemes (200+ units) can face competitive pricing on resale; boutique developments in supply-constrained locations often hold value more robustly.
IREIS Properties focuses on Zone 2–4 new-build stock priced between £500,000 and £1.5 million, where the intersection of yield, capital growth potential and tenant quality is most consistent. Our London-based team provides independent yield modelling, developer due diligence and post-completion letting introductions.
Key Takeaways
- Outer East London delivers the strongest gross yields for new-build BTL in 2026; net returns after costs are typically 1.5–2 percentage points lower. All figures are approximate and subject to market conditions.
- The limited company SPV route now dominates new BTL purchases due to Section 24's impact on individual landlords — consult a qualified UK tax adviser to assess whether this structure suits your position.
- The Renters' Rights Act 2026 is in force: familiarise yourself with Section 8 grounds, rolling tenancy rules, and the upcoming PRS landlord registration database due in late 2026.
Calculate your exact Stamp Duty liability (including the additional dwelling surcharge) → IREIS UK Stamp Duty Calculator
Exploring London buy-to-let? IREIS Properties offers end-to-end guidance — from yield modelling and developer due diligence to post-completion letting introductions.
Sources: ONS Private Rent Index, March 2026. NRLA Renters' Rights Act guidance, May 2026. Rightmove — Renters' Rights Act guide, May 2026. Mortgageable / industry data on limited company BTL prevalence, 2026. Opulent Invest — London rental yield expectations 2026.