Is buy-to-let still a viable strategy in the UK

I’ve been writing about UK property for long enough to remember when buy-to-let felt like a licence to print money. Those days are gone. The question I hear more than any other now is whether it still makes sense at all. The numbers tell a complicated story. Half of all UK landlords make less than £10,000 in profit each year, according to HMRC data. That figure alone should make anyone pause before jumping in. The market has shifted from a casual income stream to something that demands real planning and discipline.

Landlord purchases have dropped to their lowest level since 2007. The share of homes bought by investors fell from 15.8% in 2015 to just 10.8% in 2025, according to research from Hamptons. That is a dramatic retreat. Meanwhile, first-time buyers now account for a record 33% of all sales. The landscape has flipped. But here is the thing — buy-to-let is not dead. It has just become harder, more expensive, and far less forgiving of mistakes. If you go in with your eyes open, the numbers can still work. If you go in hoping for easy money, they almost certainly will not. Here is what you actually need to know.

What buy-to-let actually means in 2026

Buy-to-let is not what it was a decade ago. The core idea is the same — you buy a property, rent it out, and hope the rent covers the mortgage while the property rises in value. But the mechanics have changed so much that it is almost a different game now. The most important shift is how rental income is taxed. Before 2017, you could deduct your full mortgage interest from your rental income before paying tax. That was a huge advantage. Now, under Section 24, you pay tax on your total rental income and only get a 20% tax credit back. For higher-rate taxpayers, that change alone can wipe out most of the profit.

What I notice when I look at the data is that the landlords who are still making money are the ones who treat it like a business, not a hobby. They use limited companies to hold properties, which allows them to deduct mortgage interest as a business expense. They target cities in the North and Midlands where yields are higher. And they manage properties professionally rather than trying to do everything themselves. If you are thinking about buy-to-let, that is the mindset you need. The days of buying any old flat and watching the equity grow are over.

Why the numbers are getting tighter for landlords

The Autumn Budget announced a surprise increase in property income tax rates, effective from April 2027. Basic-rate taxpayers will pay 22% on rental income, higher-rate taxpayers 42%, and additional-rate taxpayers 47%. That two-percentage-point rise might not sound enormous, but on a rental income of £20,000, it means an extra £400 in tax for a basic-rate payer and £800 for a higher-rate payer. Multiply that across multiple properties and it becomes a serious drag on returns. One landlord with seven properties told the Guardian the change would cost him an extra £2,500 a year. He said he could not absorb that kind of hit.

Then there is the regulatory burden. Landlords now have to comply with over 170 separate regulations. The requirement to make all rental homes achieve an EPC rating of C by 2030 will force many to spend thousands on insulation, heating, and windows. The Renters’ Rights Act adds further costs around tenancy deposits, eviction procedures, and property standards. On top of that, you pay an additional 5% stamp duty when you buy a rental property, and the tax-free allowance for capital gains tax has been slashed from £12,300 to just £3,000. If you sell a property that has gone up in value, the tax bill will be much larger than it used to be.

The Office for Budget Responsibility has warned that the steady erosion of landlord returns is likely to reduce the supply of rental properties over the long term. That risks pushing rents up as demand outstrips supply. For existing landlords, that might sound like good news — higher rents mean higher income. But it also means more tenants struggling to pay, more void periods, and more political pressure for rent controls. It is not a straightforward win.

Where most landlords get the sums wrong

The mistakes I see repeated most often come down to the same few things. People underestimate costs, overestimate rental income, and ignore the tax implications until it is too late. Here is where the numbers tend to fall apart.

Ignoring the true cost of Section 24

Section 24 is the single biggest change to hit buy-to-let in the last decade. Before it came in, you could deduct your full mortgage interest from your rental income before calculating tax. Now you cannot. You pay tax on your total rental income and get a 20% tax credit on the interest. For a higher-rate taxpayer paying 42% from 2027, that means you are effectively paying tax on money that goes straight to the bank as mortgage interest. A landlord with a £150,000 interest-only mortgage at 5% pays £7,500 in interest each year. Under the old rules, that £7,500 was deducted before tax. Under the new rules, you pay 42% tax on that £7,500 — an extra £3,150 in tax. That is real money.

Forgetting about the 5% stamp duty surcharge

When you buy a rental property, you pay an extra 5% in stamp duty on top of the normal rate. On a £250,000 property, that is an additional £12,500 upfront. That money is gone before you have collected a single month’s rent. Many new landlords do not factor this into their initial calculations. They look at the rental yield and the mortgage payment, but they forget that the first £12,500 of profit is already spent before they start. If you are buying through a limited company, the stamp duty rates are different and can be even higher. You need to run the numbers before you make an offer, not after.

Underestimating the EPC C deadline

The government wants all rental properties to have an EPC rating of C by 2030. If your property is currently rated D or E, you will need to spend money on improvements. The cost varies depending on the property, but it can easily run into thousands of pounds for new insulation, double glazing, or a more efficient boiler. Some older properties may be very expensive to upgrade. If you are buying a property now, check the EPC rating before you commit. If it is below C, factor in the cost of bringing it up to standard. If you already own a property with a low rating, start planning the work now rather than waiting until 2029.

Relying on capital gains instead of rental income

Many landlords have historically made more money from property price rises than from rent. That is becoming harder. The capital gains tax allowance has dropped from £12,300 to £3,000, meaning you pay tax on a much larger share of any profit when you sell. And property price growth is not guaranteed. Savills forecasts 22.2% growth over the next five years, but that is an average. Some areas will do better, some worse. If you are relying on the property going up in value to make your investment worthwhile, you are taking a big risk. The safer approach is to make sure the rental income alone covers your costs and gives you a reasonable return.

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What I would do if I were starting now is run the numbers on a spreadsheet before looking at a single property. Include the stamp duty, the mortgage interest at current rates, the tax under Section 24, the EPC upgrade costs, and a realistic void period of at least one month per year. If the numbers still look good after all that, then it might be worth pursuing. If they look marginal, walk away. There are plenty of other investments that do not come with 170 regulations and a tax bill that keeps rising.

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How to make buy-to-let work in the current market

If you are determined to go ahead, there are ways to make the numbers stack up. It just requires more thought and discipline than it used to. Here is what I would focus on.

Use a limited company to hold the property

Holding a buy-to-let property through a limited company allows you to deduct mortgage interest as a business expense before calculating corporation tax. That is a significant advantage over holding it in your personal name, where Section 24 limits the relief. The trade-off is that you pay corporation tax on the profits, and when you want to take the money out of the company, you pay dividend tax. But for most higher-rate taxpayers, the limited company structure still works out better. You will need to set up the company, open a business bank account, and file annual accounts. It is more admin, but the tax savings can be substantial. If you are unsure about the legal structure, it is worth speaking to a property lawyer who can explain the implications for your specific situation.

Target high-yield regional cities

The national average rent hit £1,337 in late 2025, but that figure is pulled up by London and the South East. In many northern cities, you can buy a property for half the price of a comparable London flat and achieve a much higher rental yield. Cities like Manchester, Liverpool, Sheffield, and Nottingham have strong rental demand and lower purchase prices. The yield — the annual rent divided by the property price — is the number that matters most. A 6% yield on a £150,000 property in Manchester gives you £9,000 a year in rent. A 3% yield on a £400,000 property in London gives you £12,000. The Manchester property costs less than half as much and produces nearly as much income. The lower purchase price also means less stamp duty and a smaller mortgage.

Factor in the EPC C deadline now

If you are buying a property, check the EPC rating before you make an offer. If it is D or below, get quotes for the work needed to bring it up to C. Include those costs in your purchase decision. If you already own a property with a low rating, start planning the upgrades now. The work might include loft insulation, cavity wall insulation, double glazing, a new boiler, or solar panels. Some of these improvements qualify for government grants or schemes. The earlier you start, the more time you have to spread the cost. Waiting until 2029 means you will be rushing and probably paying more.

Build a cash buffer for void periods and repairs

Every rental property will have void periods — months when no tenant is paying rent. It will also need repairs, sometimes unexpectedly. A boiler breaking in December can cost £1,000 or more. A tenant leaving without notice can mean two months of no income. If you do not have cash set aside to cover these, you will be forced to use credit or sell the property at a bad time. A good rule of thumb is to have at least three months of mortgage payments and running costs in a separate savings account. That buffer gives you time to find a new tenant or arrange repairs without panic. A smart leak detector can also help you catch water damage early, potentially saving thousands in repair bills.

• 1
  Run the full numbers before buying

  Include stamp duty, mortgage interest at current rates, Section 24 tax, EPC upgrade costs, letting agent fees, and a one-month void period. If the yield after all costs is below 4%, it is probably not worth it.

• 2
  Choose your location carefully

  Target cities with strong rental demand, growing populations, and property prices that allow a yield of 6% or more. Avoid areas where prices are high but rents are stagnant.

• 3
  Decide on the right legal structure

  Compare holding the property in your personal name versus through a limited company. For most higher-rate taxpayers, the company structure saves money despite the extra admin.

• 4
  Plan for the EPC C deadline

  Check the EPC rating of any property you buy or already own. Get quotes for upgrades and start the work early. Factor the cost into your long-term budget.

• 5
  Build a cash buffer

  Save at least three months of mortgage payments and running costs in a separate account. This covers void periods, emergency repairs, and unexpected expenses without forcing a sale.

Frequently asked questions about buy-to-let

Buy-to-let is not what it was, but it is not dead either. The landlords who succeed now are the ones who treat it as a business, run the numbers carefully, and choose their locations and structures wisely. If you are thinking about getting into the market, start with a spreadsheet, not a property listing. If this was useful, you might also want to read the future of UK housing and eco-friendly investments.

Sources and Further Reading

Is now the time to buy your first UK property? — A practical look at the current market for first-time buyers, including how falling landlord demand is opening up opportunities.

Buy-to-let landlords face further squeeze after autumn budget tax changes. The Guardian, 2026.

Is buy-to-let dead in the UK? Yields, taxes and outlook. Property Division, 2026.