The Renters’ Rights Act 2025 represents the most significant shake-up to England’s private rented sector since the late 1980s. With Phase 1 changes already in force from 1 May 2026, many landlords are understandably asking what this means for their bottom line. We break down the key changes that directly affect rental income, from restrictions on rent increases and advance payments to the ban on rental bidding, and explore what options landlords have to protect and maximise their returns.
What Has Actually Changed Under the Renters’ Rights Act?
The headline changes are substantial. Assured shorthold tenancies have been abolished entirely, replaced by assured periodic tenancies that roll on a weekly or monthly basis with no fixed end date. Section 21 “no fault” evictions are gone, meaning landlords now need a specific legal reason, known as a ground for possession, to reclaim their property.
For landlords focused on rental income, though, the provisions around rent increases, rent in advance, and rental bidding deserve the closest attention.
How Do the New Rent Increase Rules Work?
Under the Renters’ Rights Act, landlords can only increase rent once per year and cannot do so within the first 12 months of a new tenancy. Every increase must be served using the official Form 4A, with at least two months’ notice given to the tenant.
Crucially, rent review clauses written into existing tenancy agreements can no longer be used. Even if your contract specifies a mechanism for mid-year increases, that clause is now unenforceable. The only route to raising rent is through the statutory section 13 notice process.
Can Tenants Challenge a Rent Increase?
Yes. Tenants can refer a proposed rent increase to the First-tier Tribunal if they believe it exceeds the market rate. The tribunal can set a lower rent if it agrees the increase is above market value. However, it cannot raise the rent beyond what the landlord originally proposed, so there’s no risk of the process backfiring in that sense.
It’s worth noting that landlords cannot evict a tenant for challenging a rent increase, which removes any deterrent tenants might previously have felt about disputing proposed rises.
What Does the Rent in Advance Cap Mean for Landlords?
Before the Act, there were no legal limits on how much rent a landlord could request upfront. Some landlords routinely asked for several months in advance, particularly from tenants without traditional references or those new to the UK.
From 1 May 2026, landlords cannot ask for, encourage, or accept more than one month’s rent in advance. This payment cannot even be requested before the tenancy agreement has been signed. Local councils now have the power to fine landlords who breach this rule.
For landlords who previously used larger advance payments as a form of financial security, this change does reduce one tool for managing risk. However, it doesn’t directly cap how much rent you can charge on a monthly basis.
How Does the Rental Bidding Ban Affect Income?
The prohibition on rental bidding is another change that could influence what landlords ultimately receive. Under the new rules, any written property advertisement must include a specific asking price. Landlords and letting agents cannot invite, encourage, or accept offers above the advertised rent.
In competitive rental markets where bidding wars had become commonplace, this effectively caps income at whatever figure appears in the listing. Landlords need to price accurately from the outset rather than relying on market competition to push rents above the asking price.
What Other Changes Could Impact Your Returns?
Several additional provisions, whilst not directly setting rent levels, create new obligations that landlords should factor into their financial planning.
Pets in Rented Properties
Tenants now have the right to request permission to keep a pet. Landlords must consider each request and can only refuse with a good reason. This doesn’t carry a direct financial cost, but landlords should consider whether additional cleaning or wear and tear might affect margins over time.
Discrimination Protections
It is now illegal to refuse tenancy applications from prospective tenants who receive benefits or have children. Councils can issue fines to landlords and agents who break these rules. Whilst this doesn’t limit income directly, it does narrow the criteria landlords can use when selecting tenants.
Grounds for Possession
Landlords who need to sell their property or move back in can still use grounds for possession, but not within the first 12 months of a tenancy. Other grounds cover rent arrears, antisocial behaviour, and student HMO situations. The notice period for most grounds is four months, though some allow shorter periods.
What’s Coming in Phases 2 and 3?
The Act is being rolled out in three phases. Phase 1, covering the tenancy reforms, rent rules, and enforcement powers, is already live. Phase 2 will introduce a new private rented sector database and an ombudsman service, with the database expected from late 2026 and the ombudsman anticipated in 2028.
Phase 3 focuses on property standards. Private landlords will need to ensure their properties meet an EPC rating of C by 1 October 2030 and comply with a decent homes standard by 2035. These requirements could involve significant investment for some properties, which will inevitably affect net returns.
Does the Act Actually Limit Rental Income?
The honest answer is that the Renters’ Rights Act doesn’t impose a rent cap, but it does restrict how and when you can increase rent, eliminates competitive bidding, and limits advance payments. For landlords operating traditional long-term lets, the impact on headline income may be modest, particularly if you were already pricing at fair market value and increasing rent responsibly.
Where the Act does bite harder is in reducing flexibility. The combination of annual-only increases, tribunal challenge rights, and the bidding ban means landlords have fewer levers available to maximise income from assured tenancies.
This is precisely why many property owners are exploring short-term rental strategies as an alternative or complement to traditional letting. Holiday lets, serviced accommodation, and Airbnb properties operate under different regulatory frameworks and offer dynamic pricing that responds to real-time market demand rather than being constrained by annual statutory increases.
How Easier Management Helps Landlords Maximise Returns
We understand that navigating legislative change whilst trying to protect your investment can feel overwhelming. That’s exactly why we offer comprehensive, hands-off property management services across the South West, from short-term lets and serviced accommodation to HMO management and guaranteed rent schemes.
Our dynamic pricing technology ensures your property captures optimal rates throughout the year, and our guaranteed rent scheme provides stable monthly income for up to five years with absolutely no setup fees, no commissions, and no hidden charges. Whether you’re considering luxury Airbnb management Bristol or exploring serviced accommodation in Bath, we handle everything so you don’t have to.
Contact us today for a free property valuation and discover how we can help you make the most of your investment, whatever the regulatory landscape looks like.
