Is buy-to-let still worth it?
The economics have shifted dramatically since 2020. Section 24 — the rule that mortgage interest is no longer deductible as an expense for personal landlords — combined with the 5% Stamp Duty surcharge on additional properties, has crushed net yields for many landlords.
A property yielding 5% gross rent with a 5% mortgage rate now nets far less after tax, especially for higher-rate taxpayers. Many have moved to Limited Companies (SPVs), which can deduct interest fully and often pay lower overall tax. This calculator lets you model both and see the crossover point.
Section 24 explained
The law (since April 2020): For personal landlords, mortgage interest paid is no longer an allowable expense. Instead, you get a 20% personal tax credit on interest paid. This is brutal for higher-rate taxpayers.
Example: You earn £50,000/year (basic rate) and pay £4,000 in mortgage interest. Instead of reducing your taxable rental profit by £4,000 (saving £800 at 20%), you get a £800 credit (20% of £4,000). Net effect: same. But if you're a 40% higher-rate taxpayer, you get £800 credit instead of £1,600 deduction — a £800 loss. At 45% additional rate, you lose £1,000.
The loophole: Limited Companies can deduct interest as a normal expense. So a company with the same £4,000 interest saves corporation tax (25% or 19%) on that amount. The owner then pays dividend tax on profits extracted (8.75%–39.35%), but the total is often lower.
Personal vs Limited Company (SPV)
Personal landlord: Rental income is your income tax; interest is not deductible but you get a 20% credit. This works fine at basic rate (20%), but higher-rate taxpayers lose out. You pay CGT (18% basic, 24% higher) on any gain when you sell, with a £3,000 annual exemption. You also pay the 5% SDLT surcharge on purchase.
Limited Company: The company deducts interest as a normal expense. Taxable profit faces corporation tax (25% standard; 19% if profit under £50k; marginal relief £50k–£250k). When you extract profit as a dividend, you pay dividend tax (8.75% basic, 33.75% higher, 39.35% additional) — but you get a £1,000 allowance. On sale, the company pays corporation tax on the gain (not CGT). Structurally more complex and costly to set up and run.
Crossover: Generally, a company makes sense if you're a higher-rate taxpayer, have high mortgage interest relative to profit, or own multiple properties. For a single property with modest interest and basic-rate tax, personal ownership often wins.
Your inputs
Detailed breakdown
| Item | Annual amount |
|---|---|
| Monthly rent × 12 | £0 |
| Less: running costs | £0 |
| EBITDA (rent minus running costs) | £0 |
| Less: mortgage interest (deductible) | £0 |
| Taxable profit | £0 |
| Tax at your rate | £0 |
| Net cashflow (EBITDA less tax) | £0 |
Hidden costs not in this calculator
Voids and bad tenants: Even in buoyant markets, expect 5–8% of the year with no rent. Legal action to evict can take months and cost £5,000+. Arrears protection insurance is rare and expensive.
Major repairs: Boiler replacement (£2,000–£5,000), roof repairs, structural issues. Your running costs estimate needs to include reserves for these. Most landlords under-estimate.
EPC upgrades: From April 2028, letting a property with an EPC rating of F or G will be illegal. Bringing a property from G to D can cost £15,000–£30,000 in energy efficiency work. Many buy-to-lets will need investment.
Mortgage remortgage fees: Every 2–5 years, you'll switch lenders or re-fix. Arrangement fees (£500–£1,500), valuation fees, legal fees. Budget £1,500–£2,500 per remortgage.
Borrowing costs: The mortgage interest you pay is itself a cost — modeled here, but often underestimated. Buy-to-let rates are typically 0.5–1% higher than residential.
Capital Gains Tax on sale
When you sell, you'll pay CGT on the gain (purchase price to sale price, minus costs of improvement). Personal landlords pay 18% (basic rate) or 24% (higher rate), with a £3,000 annual exemption. Companies pay corporation tax on the gain (25% or 19%).
Neither structure gets preferential rates on residential property sales anymore. This is a significant cost to factor into your hold period.
The 60-day CGT reporting rule
From April 2020, when you sell a residential property in the UK, you must report the sale and pay any CGT owed within 60 days of completion. HMRC can issue penalties and interest if you miss the deadline. Mark your calendar when contracts exchange.
This is not tax advice
Buy-to-let tax treatment is complex and depends on your circumstances (capital gains, number of properties, company structure, furnished holiday lettings, mortgage revaluations). This calculator shows the mechanics of Section 24, SDLT, and basic tax treatment but omits many details. Always consult a qualified tax adviser or accountant before purchasing a buy-to-let or changing ownership structure. The rules also change year to year — especially on SDLT, mortgage interest relief, and corporation tax rates.