Is buy-to-let worth it?

On the face of it, buy-to-let seems like a pretty good deal – and historically, it has been. After all, you get a solid asset that should steadily grow in value over the long term and, in the meantime, generate income in the form of rent. However, property prices have been volatile in recent years, plus changes to mortgage interest relief, a stamp duty surcharge, and legislation changes have altered the financial equation. So, before you take the plunge and invest in a buy-to-let property, it's worth asking: is buy-to-let still worth it in 2025? 

Read our overview to get a sense of the pros and cons and decide whether buy-to-let is the right move for you. 

The case for buy-to-let: the “pros” 

There are still plenty of strong arguments in favour of buy-to-let. The main ones are: 

• Strong rental demand. There’s still plenty of demand for rental properties, although a 32% year-on-year surge in new buy-to-let loans in early 2025 has also driven an 18% year-on-year increase in the number of rental homes available. As a result, it isn’t quite the market that it once was.  

• Potential for long-term capital growth. UK house prices rose 3.7% in the year to May 2025, and most lenders foresee modest growth of 2–4% going forward. Historically, property has typically performed well over the long term, although price increases fluctuate year-on-year. For example, in today’s prices, the average house cost £172k in 1990, £177k in 2000, £278k in 2010, and £286k in 2020.  

• Good rental yields. According to the Office for National Statistics, the average UK monthly private rent increased by 7% to £1,339 in the 12 months to May 2025. However, that’s lower than the 7.4% over the previous year, suggesting that this growth may be slowing down in correlation with the increase in the number of rental homes available.  

The challenges: the ‘cons’ to understand 

The financials of buy-to-let still look good, even with the potential slowdowns described above. However, there’s more to buy-to-let than buying a property and collecting the rent. You also have to market your property, find tenants, maintain the property, comply with legal requirements, address issues such as non-payment of rent, and provide a decent home for people to live in. Many of these responsibilities can be taken off your plate by using a letting agent, although they will take a cut of the rent, thereby lowering your rental yield. 

For an authoritative overview of a landlord’s responsibilities, see the government’s ‘how to let’ guide.  

Section 24 

In 2015, the government introduced a new tax rule that restricts the amount of mortgage interest and other finance costs that individual landlords can deduct from their rental income before calculating their tax bill. Instead of deducting 100% of mortgage interest from rental income, landlords now pay basic rate tax (20%) on finance costs.  

Section 24 particularly affects landlords with more borrowing or those who pay tax at a higher rate – although it doesn’t apply if you own property through a limited company.  

Landlords buying residential properties also pay a higher rate of Stamp Duty Land Tax, known as the “Higher Rates for Additional Dwellings”(HRAD). These are 5% on the value up to £125k, 7% on the next £125k, 10% on the next £675k, 15% on the next £575k, and 17% on the rest.  

However, there is one piece of good news for landlords: in 2024, capital gains tax (CGT) on residential property was cut from 28% to 24% for higher and additional rate taxpayers. 

Find out more about the tax implications of being a landlord in our guide.  

Stronger regulation under the Renters’ Rights Bill 

The Renters’ Rights Bill is a proposed Act designed to improve the rights of people renting a home in England. It was introduced to Parliament in 2024 and is likely to become law in late 2025 or early 2026.  

Under the Bill, tenants will gain more protection against eviction. “No fault” Section 21 evictions will be abolished, as will fixed-term assured tenancies. Instead, all assured tenancies will be periodic, so tenants can give two months’ notice to end their tenancy at any time. Landlords will only be able to increase rents once a year, with no rent increases written into contracts. All landlords will have to register themselves and their properties in a national database.  

Tenants will be able to appeal above-market rents and will also have more time to find a new home if they are evicted. There are also provisions covering making homes safe, protecting tenants who temporarily fall behind with their rent, and a tenant’s right to have a pet. 

While all these changes are intended to protect tenants, some observers argue that they will increase maintenance and legal costs for landlords, lengthen the eviction process, and exacerbate problems with rent arrears. One way to help mitigate the risk of unpaid rent and legal costs is through rent guarantee insurance and landlord legal expenses cover.  

Mortgage rates and property prices 

Finally, you also need to be aware of the possibility of mortgage rate rises and ensure that the property would still be affordable and a good investment if rates were to rise in the future.  

Investment in bricks and mortar can’t be disposed of as quickly as shares or other investments can and selling a property can take months – if you need to get your hands on the money urgently, you won’t be able to wait until the best time to sell to maximise the return on your investment. 

How to work out your rental yield 

“Yield” refers to the annual return you make on the price you paid for your property. 

To calculate it, divide the total annual rent by the value of the property, then multiply that figure by 100 to get a percentage.  

For example, if you paid £200,000 for a house and your annual rental income is £12,000, the yield is 6%. To compare this with other traditional investments, to get the same level of return on £200,000 in a savings account, you would need to find an account that pays 6% interest. 

When projecting the rent you could charge, be realistic and research the local market. If you are aiming to charge tenants £1,000 a month, but there are similar properties in the neighbourhood charging their tenants less than that, you may struggle to find occupants. 

Owning through a company 

Owning buy-to-let assets through a limited company means you benefit from lower corporation tax rates and full deduction of mortgage interest as an expense, protecting your assets from business debts, and easier succession planning and portfolio growth. If you’re a lower-rate taxpayer, however, you might see smaller savings – or even a cost, due to the admin involved in running a limited company. 

Finding the right mortgage 

The wide range of options in the buy-to-let mortgage market can be daunting, but there are several things you can do to simplify the search for a loan. 

First, talk to your current bank. They will only be able to give you information on the products they offer, rather than market-wide, but if you already have a good relationship with them, you might find the application process is easier. 

Alternatively, consult a mortgage broker who specialises in buy-to-let. One advantage of this approach is that a broker will have access to a wider selection of lenders and products. A specialist broker will also be familiar with issues that are particular to buy-to-let customers, and if you’re a new landlord you might benefit from their all-round knowledge. Make sure you check their fees in advance. 

A simplified profitability checklist 

Use this checklist to weigh up the most important factors when considering a buy-to-let purchase.  

Would a holiday home be a better option? 

Rents from holiday homes can be up to three times higher than those from a buy-to-let. However, the costs – cleaning, dealing with damage deposits, marketing – are also higher. Additionally, your property might be empty outside the peak holiday seasons.  

If you’re considering this option, take a look at our in-depth comparison of holiday homes vs. buy-to-let.   

Is buy-to-let still worth it? 

Without a doubt, buy-to-let isn’t for everyone, but it can still be a wise investment if you fit the right profile.  

Buy-to-let may be worth considering if you… 

• Plan to invest over the long-term. Buy-to-let suits individuals who can leave their money invested for several years, allowing them to ride out the peaks and troughs in the property market. 

• Have an eye on retirement. Buy-to-let properties can be ideal for generating a steady income to support owners into their retirement. However, bear in mind that there is some work involved, unless you ask an agent to handle everything on your behalf.  

• Are happy investing through a limited company. Placing a company “wrapper” around your buy-to-let assets may save you tax, particularly if you have a larger portfolio, and ease succession planning.  

• Are in a strong financial position. Buy-to-let probably means taking on one or more mortgages, paying a higher deposit, and covering costs such as maintenance and agents’ fees. A financial cushion will help you ride out cashflow hiccups and provide peace of mind.  

• Find the landlord’s life appealing. Not everyone is suited to being a landlord. If you’re interested in the property market and don’t mind looking after the properties you own, life as a landlord could suit you.  

• Have “accidentally” become a landlord. If you inherited a property or moved in to share a home with your partner, you may already have a property that would work well as a rental property.