Buy-to-Let Property Guide UK

What is buy-to-let?

Buy-to-let (BTL) means purchasing a residential property specifically to rent it out to tenants, rather than to live in yourself. It's one of the most well-known routes to building wealth in the UK — but the landscape has changed significantly over the past decade, and it's considerably more complex than it once was.

Done well, buy-to-let can provide rental income, long-term capital appreciation, and some inflation hedging. Done badly, it can result in negative cash flow, tax headaches, and significant stress. This guide covers the key numbers and considerations UK investors need to understand.

Understanding rental yield

Yield is the most common metric for comparing buy-to-let properties. There are two versions:

• Gross yield: Annual rental income ÷ purchase price × 100. For example, a £200,000 property earning £10,000/year in rent = 5% gross yield.
• Net yield: Same calculation but after deducting costs (mortgage interest, letting agent fees, maintenance, insurance, void periods). Net yield is typically 1.5–2.5% lower than gross.

Most financial advisers suggest a gross yield of at least 5–6% to make buy-to-let viable, though this depends heavily on your financing costs. In London, gross yields often fall below 4%, which rarely covers mortgage costs. Higher yields (6–9%+) are more common in the North of England, Wales, and Scotland.

The mortgage reality

Buy-to-let mortgages are different from residential ones. You'll typically need:

• A deposit of at least 25% (some lenders require 40%)
• A rental income that covers 125–145% of the monthly mortgage payment (lenders' stress test)
• A higher interest rate than a residential mortgage

With rates currently elevated, many landlords are finding their rental income barely covers mortgage costs after a remortgage. Always model your numbers at a higher rate than today's — say 2% above your current deal — as a stress test.

Tax: the big change

The tax treatment of buy-to-let changed dramatically between 2017 and 2020. Previously, landlords could deduct mortgage interest from rental income before calculating tax. Now, you only get a basic-rate (20%) tax credit on mortgage interest — meaning higher-rate taxpayers pay significantly more. This caught many landlords off guard.

Other taxes to understand:

• Stamp Duty: A 3% surcharge applies on top of standard Stamp Duty rates for second properties. On a £250,000 property, this adds £7,500.
• Capital Gains Tax (CGT): When you sell, gains are taxed at 18% (basic rate) or 24% (higher rate) for residential property. See our Capital Gains Tax guide for details.
• Income Tax: Rental profits are added to your other income and taxed at your marginal rate.

For more on the property CGT specifically, see our CGT on property guide.

Costs often overlooked

Many new landlords underestimate ongoing costs:

• Letting agent fees: typically 10–15% of monthly rent for full management
• Void periods: budget for 1–2 months empty per year
• Maintenance: 1% of property value per year is a common rule of thumb
• Landlord insurance, EPC certificates, gas safety checks, electrical inspections
• Accountant fees if running as a limited company

Is buy-to-let right for you?

Buy-to-let works best for investors who have a large deposit, are comfortable with illiquidity (property is slow to sell), and are prepared to deal with tenancy management. For most UK investors starting out, a low-cost global index fund inside a Stocks and Shares ISA will likely outperform buy-to-let on a risk-adjusted basis — with no voids, no maintenance, and instant liquidity.

That's not to say property is a bad investment — just that it's rarely the slam-dunk it was pre-2017. If you're weighing up property versus other investments, read our how to start investing guide and our ISA comparison first.

Written by the IMZA Invest Team. Last reviewed March 2026.