Guide · 4 min read
Is buy-to-let still worth it?
Higher rates, Section 24 and stamp duty have squeezed buy-to-let. Here's what a typical deal makes today after every cost and tax, and when it's still worth doing.
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Key points
- Our typical deal, a £180,000 house let for £1,100 a month, leaves £310 a month after every cost and the mortgage. That's 6.5% a year on the £57,599 put in, before tax.
- After tax, a Income tax bandsIn England and Wales: no tax on the first £12,570 (the personal allowance), 20% basic rate up to £50,270, 40% higher rate up to £125,140 and 45% above. Rent is added to your other income, so it's taxed at your top rate. From April 2027, property income has its own rates: 24%, 44%, 49%. keeps £2,978 a year (5.2%). A higher-rate taxpayer keeps £883 (1.5%).
- Anything more has to come from house prices, which nobody can promise.
- It's worth it for landlords who buy at the right price, borrow sensibly, own in the right way for their tax rate, and hold for many years. It rarely works as a quick win.
One typical deal
A £180,000 terraced house let for £1,100 a month: a Gross yieldA year's rent as a percentage of the price. Quick, but it ignores every cost. of 7.3%, the kind of deal found in many towns in the North of England. The buyer already owns a home and puts down 25%, with a 5% Interest-only mortgageYou pay only the interest each month (the loan × the yearly rate ÷ 12) and owe the whole loan at the end.. It's let through an agent at 10% of the rent, with 5% set aside for repairs, £20 a month of insurance and 2 empty weeks a year.
These are the same numbers our deal check starts with. Your deal will differ, so put yours in at the end.
After every cost
To buy it took £57,599: the £45,000 deposit, £10,100 of Stamp dutyThe tax on buying a home in England (Stamp Duty Land Tax): 0% up to £125,000, 2% to £250,000, 5% to £925,000, 10% to £1.5 million and 12% above, each rate on the part of the price in its band. A buy-to-let or second home pays 5% more in every band, and buyers who don't live in the UK pay 2% more., £1,500 of legal fees and a £999 mortgage fee. The deposit stays yours, in the house. The stamp duty and fees, £12,599, are gone: at this cash flow they take about 3.4 years to earn back, before tax.
After tax
Tax depends on who owns the property and what else they earn. Here's the same deal four ways: owned personally by someone earning £30,000 (a basic-rate taxpayer) or £60,000 (higher-rate), or through a Limited company buy-to-let (SPV)Owning through a company of your own, often a 'special purpose vehicle' set up only to hold property. The company pays corporation tax on the profit and deducts mortgage interest in full; you pay dividend tax on what you take out. It pays the higher rates of stamp duty or Land Transaction Tax..
| Owned | Tax | Cash left after tax | Return on cash |
|---|---|---|---|
| In your own name, basic-rate taxpayer | £744 | £2,978 | 5.2% |
| In your own name, higher-rate taxpayer | £2,839 | £883 | 1.5% |
| Through a company, profit kept in it | £479 | £2,043 | 3.5% |
| Through a company, paid to a higher-rate owner | £1,031 | £1,491 | 2.6% |
In your own name, mortgage interest only earns a Tax credit for mortgage interestThe 20% of your mortgage interest and fees that comes off your income tax bill under Section 24. It's worked out on the interest, the profit or the income above your personal allowance, whichever is smallest, and any left over carries forward. at the basic rate (Section 24), which is why the higher-rate taxpayer keeps so much less. A company deducts the interest in full but pays its own running costs, about £1,200 a year here, and tax again when it pays you a dividend. Limited company or your own name? compares them properly.
From 6 April 2027 property income is taxed four points more than other income. On the same deal the basic-rate taxpayer would keep £2,694 a year and the higher-rate one £599.
Against a savings account
Our deal check calls a return of 5% a year or more on your cash, before tax, a good one. Below that, a fixed-rate savings account or an index fund can pay about as much, with no tenants, repairs or risk. This deal makes 6.5% before tax, so it clears that bar.
After tax it's closer than it looks, because savings interest is taxed too. The bigger differences are elsewhere: a rental is work, it can't be sold in a day, and most of the cash is tied up in one house in one street. What you get for that is a share of whatever the house's value does, bought mostly with a lender's money.
Where the rest of the return comes from
Because you borrowed 75% of the price, a small change in the house's value is a big change in your share of it. These aren't forecasts; they show how much the answer depends on prices.
| If | The house is worth | Your share |
|---|---|---|
| Prices fall 10% | £162,000 | £27,000 |
| Prices stay the same | £180,000 | £45,000 |
| Prices rise 2% a year | £198,735 | £63,735 |
Your share started as the £45,000 deposit. Selling costs and Capital gains taxTax on the gain when you sell a property you don't live in: the sale price less what you paid, buying and selling costs and improvements. It's 18% or 24% after the first £3,000 of gains each tax year, reported and paid within 60 days. on a sale aren't counted here, and they'd take a slice of any gain.
What can go wrong
The same deal, if one thing changes:
| If | Cash left a month | Change |
|---|---|---|
| Nothing changes | £310 | |
| Rate rises to 6% | £198 | −£113 |
| Rate rises to 7% | £85 | −£225 |
| Rent falls 10% | £221 | −£89 |
And the things no table shows well: a tenant who stops paying, a boiler or a roof in the same year, months between tenants, and new rules for landlords that add costs. Keep a cash buffer of a few months' costs, and check a deal still pays when your Fixed rateA mortgage rate that stays the same for a set time, often 2 or 5 years. When it ends the loan moves to the lender's standard variable rate unless you take a new deal. ends.
So, is it worth it?
On these numbers it can be, but not for everyone and not quickly.
- It tends to work for a basic-rate taxpayer, or through a company; when the rent passes the lender's test with room to spare; when there's a cash buffer; and when you plan to hold for ten years or more.
- It tends not to for a higher-rate taxpayer owning in their own name with a big loan; when the deal only works if prices rise; or when you might need the cash back within a few years, as stamp duty and fees take years to earn back.
The deal itself matters most. A lower price or a higher rent does more for the return than anything else, so see How much should I pay for a rental property? and Rental yield before you offer. If you check deals with another calculator, make sure it counts the tax: Buy-to-let calculators compared shows which do.
Common questions
Is buy-to-let worth it without a mortgage?
It can be, and it's safer. With no loan, rate rises can't hurt you and Section 24 doesn't apply. Before tax you earn a little under the 5.8% net yield on our example, usually less than a borrower makes on their cash. After tax, a higher-rate taxpayer can do better with no mortgage at all.
What happens if the rent doesn't cover the mortgage?
You pay the gap yourself each month, and tax can still be due. In your own name, mortgage interest isn't taken off the rent; it only earns a tax credit at the basic rate. So a higher-rate landlord can owe tax on a home that loses cash. A dearer mortgage after a fix ends is the usual cause.
Can you lose money on buy-to-let?
Yes. If prices fall 10%, your share of our example drops from the £45,000 deposit to £27,000, because the whole fall comes off your part. The £12,599 of stamp duty and fees is gone from day one, and selling adds more fees. A forced sale in a weak market can lose real money.
How many rental properties do you need to live off?
More than most people expect. Our example leaves £2,978 a year after tax for a basic-rate taxpayer. As the rent adds up, more of it is taxed at the higher rate, so replacing a full salary takes a large portfolio or mortgages that are paid off. Keep money back for repairs and empty months too.
Figures from our calculator, on the rules in force today, checked against GOV.UK and the Welsh Revenue Authority on 31 October 2026. Not financial or tax advice: check your own case with an accountant.