Is Buy-to-Let Still Worth It in 2026? The Real Numbers

If you are asking whether is buy to let worth it in 2026, the honest answer is: it depends entirely on the numbers, and the numbers are tighter than they used to be. A decade ago a landlord could buy almost anything, ride rising prices and bank a comfortable margin. Today, mortgage interest is no longer fully deductible for individuals, there is a 5% stamp duty surcharge on additional property, capital gains tax bites on sale, and rising costs eat into rent. None of that means buy-to-let is dead - plenty of deals still stack up - but it does mean you have to do the maths properly before you sign anything. This guide focuses on the profit side: what you actually keep after every cost and tax.

Gross yield vs net yield: the only two numbers that matter first

Estate agents love quoting gross rental yield because it looks generous. It is simply annual rent divided by the purchase price:

Gross yield = (annual rent ÷ property price) × 100

A £200,000 flat let at £1,000 a month produces £12,000 a year, a gross yield of 6%. That figure tells you almost nothing useful, because it ignores every cost of actually owning and running the place. The number that decides whether a deal works is net rental yield - rent left after running costs, divided by your total cash invested (price plus stamp duty, legal fees and any refurbishment).

As a rough rule of thumb, net yield is often around half to two-thirds of gross yield once you strip out costs. A 6% gross deal can quietly become a 3% net deal - and that is before tax. If you want to compare properties quickly, the Rental Yield Calculator does both figures for you.

The real costs nobody puts on the listing

Here is where most first-time landlords are caught out. Rent is income; profit is what survives the following:

• Mortgage interest - usually the biggest single cost. On a typical buy-to-let mortgage at around 5.5% interest-only, a £150,000 loan costs roughly £8,250 a year.
• Letting agent fees - full management is commonly 10%–15% of rent (plus VAT). On £12,000 rent that is £1,200–£1,800.
• Maintenance and repairs - budget at least 1% of the property value a year, more for older homes. Boilers, roofs and white goods do not last forever.
• Void periods - empty months when you still pay the mortgage. Assume two to four weeks a year as a baseline.
• Landlord insurance - buildings cover plus liability, typically £150–£400 a year.
• Compliance - gas safety certificate, EICR electrical check, EPC, smoke alarms, plus possible licensing fees in some councils.
• Service charge and ground rent - on leasehold flats this can run to thousands a year and is easy to forget.

Add these up and the picture changes fast. The tool below pulls all of it together - rent in, every cost out, and your net profit - so you can see whether a deal genuinely works before you commit.

How Section 24 squeezes individual landlords

This is the single biggest reason buy-to-let profit has fallen for higher earners. Before 2017, landlords deducted mortgage interest from rental income and paid tax only on what was left. Section 24 phased that out. Now, if you own property in your own name, you cannot deduct mortgage interest as an expense at all. Instead you pay income tax on your full rental income and receive a flat 20% tax credit on the interest.

For a basic-rate taxpayer this is broadly neutral. For a higher-rate (40%) or additional-rate (45%) taxpayer it is painful: you are taxed at your marginal rate on income you never really kept, and only get 20% relief back. In some highly geared cases, a landlord can owe tax even when the property barely breaks even in cash terms. To see the effect on your own figures, use the Section 24 Calculator.

A worked example: does this deal actually profit?

Let us run a realistic 2026 purchase. Sarah, a higher-rate taxpayer, buys a £200,000 flat with a £150,000 interest-only mortgage at 5.5%. Rent is £1,100 a month (£13,200 a year).

Now apply Section 24. Sarah is taxed on rental profit calculated without deducting the £8,250 interest. Her taxable rental income is about £8,165 (rent minus the non-interest costs). At 40% that is roughly £3,266 of tax, reduced by the 20% interest tax credit of £1,650 - a tax bill of about £1,616. So a property that broke even in cash terms produces a real-world loss of around £1,700 a year after tax. That is exactly the trap Section 24 sets for geared higher-rate landlords.

Change one variable - a smaller mortgage, cheaper area with higher yield, or self-management instead of an agent - and the same property can swing into solid profit. That is why running your specific numbers through the Buy-to-Let Profit Calculator matters more than any general rule.

The 5% stamp duty surcharge on additional property

In England and Northern Ireland, buying an additional residential property (anything that is not replacing your main home) adds a 5% surcharge on top of every standard SDLT band. On a £200,000 buy-to-let that is a £10,000 surcharge on top of the standard £1,500 - a £11,500 SDLT bill before you have collected a penny of rent. Scotland charges 8% Additional Dwelling Supplement on the whole price under LBTT, and Wales applies higher residential LTT rates. This upfront cost is real money that lowers your true net yield, so always include it in your cash-invested figure.

Capital gains tax when you sell

Buy-to-let is taxed twice: on rental profit each year, and on the gain when you sell. For 2026/27 the CGT annual exempt amount is just £3,000 - a fraction of what it once was. Residential property gains above that are taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. On a £60,000 gain, a higher-rate landlord could face around £13,680 of CGT (£60,000 minus £3,000, taxed at 24%). You must report and pay residential CGT to HMRC within 60 days of completion. Factor this into your exit plan from day one - a paper profit is not a pocketed profit.

Individual ownership vs a limited company

Because Section 24 only hits individuals, many landlords now buy through a limited company, where mortgage interest is still a fully deductible expense and profits are taxed at corporation tax rates (19% on profits up to £50,000, rising to 25% above £250,000 with marginal relief between). For a higher-rate taxpayer building a portfolio, this can materially improve net returns.

But it is not a free lunch. Company buy-to-let mortgages usually carry higher rates and fees. You pay corporation tax inside the company, then tax again when you extract profit as dividends (10.75%/35.75%/39.35%). There are accountancy and filing costs, and moving an existing personally-held property into a company is a sale - triggering CGT and a fresh stamp duty bill. As a rough guide, the company route tends to suit higher-rate taxpayers reinvesting for the long term; a single property held by a basic-rate taxpayer is often simpler and cheaper held personally. For a fuller treatment of the tax side, see our guide to tax on rental income.

How to judge whether a deal stacks up

Before you offer, work through this checklist:

• Net yield, not gross. Aim to understand the figure after all running costs, on your total cash invested.
• Stress-test the mortgage. Does it still profit if rates rise 1–2%? Many 2020 deals broke when rates climbed.
• Apply your real tax position. A 4% net deal looks different to a basic-rate vs higher-rate landlord after Section 24.
• Include the upfront costs. Stamp duty surcharge, legals and refurb are part of your invested capital and drag on returns.
• Plan the exit. Estimate CGT now so the eventual sale is not a nasty surprise.
• Compare alternatives. Could the same cash earn more, with less hassle, elsewhere? See our investing guides and our walkthrough on how to invest in property in the UK.

Risks and common mistakes

The mistakes that turn a promising deal into a loss are almost always avoidable:

• Quoting gross yield to yourself. It is marketing, not profit. Always net it down.
• Ignoring Section 24. Higher-rate landlords who budget as if interest is deductible routinely overestimate profit by thousands.
• No void or maintenance buffer. A single empty quarter or a £4,000 boiler-and-roof year can wipe out a thin margin.
• Over-leveraging. A 90% loan magnifies gains and losses. Modest borrowing is far more resilient to rate rises and voids.
• Forgetting the surcharge and CGT. Buying and selling costs can swallow several years of rental profit if you are not in for the long haul.
• Assuming prices only rise. Capital growth is a bonus, not a plan. A deal should make sense on rental income alone.

So, is buy-to-let still worth it? For a well-chosen property, bought at a sensible price with modest borrowing, in an area with strong tenant demand and a yield that survives every cost and tax - yes, it can still be a solid long-term investment. For an overpriced flat bought with a big mortgage by a higher-rate taxpayer who only looked at gross yield - increasingly, no. The difference is entirely in the numbers, which is why doing the maths before you buy is the most valuable thing you can do.

FAQs

What is a good rental yield in 2026?

There is no single answer, but many landlords look for a gross yield of at least 6%–7% to leave a healthy net figure after costs. In high-price areas yields are often lower and the bet relies more on capital growth; in lower-price regions yields can be considerably higher. Always judge the net yield after every cost, not the headline gross figure.

Is buy to let still worth it for a higher-rate taxpayer?

It can be, but Section 24 makes it harder because you only get a 20% credit on mortgage interest rather than full relief. Many higher-rate landlords now buy through a limited company, use lower borrowing, or target higher-yielding areas to keep the deal profitable. Run your own figures before deciding.

How much stamp duty do I pay on a buy-to-let?

In England and Northern Ireland you pay standard SDLT plus a 5% additional-property surcharge on every band. Scotland charges an 8% Additional Dwelling Supplement and Wales applies higher LTT rates. On a £200,000 property in England that is roughly £11,500 in total - a significant upfront cost.

Do I pay capital gains tax when I sell a buy-to-let?

Yes. For 2026/27 you have a £3,000 annual exempt amount, then gains are taxed at 18% (basic rate) or 24% (higher and additional rate). You must report and pay within 60 days of completion.

Is it better to own buy-to-let personally or through a company?

Personal ownership is simpler and cheaper for a single property, especially for basic-rate taxpayers. A limited company keeps mortgage interest fully deductible and can suit higher-rate taxpayers building a portfolio, but brings higher mortgage rates, extra costs and double taxation on extracted profit. Take advice for your situation.

Sources

• GOV.UK - Tax relief for residential landlords (Section 24)
• GOV.UK - Stamp Duty Land Tax residential rates and surcharge
• GOV.UK - Capital Gains Tax rates and allowances

This guide is general information, not personal financial advice. For your own circumstances, speak to a qualified adviser.

Investors buying at auction or refurbishing a property often use a bridging loan for fast, short-term finance before refinancing onto a mortgage.