Is buy-to-let still worth it in 2026? Pros, cons and alternatives

Over the last decade, there have been many changes to the buy-to-let sector, including to mortgage interest relief and a stamp duty surcharge, leaving many potential landlords asking: ‘Is buy-to-let still worth it?’ 

These changes have hit landlords’ profits, while mortgages are much more expensive.

So, should you give up on buy-to-let property – or is it still a useful source of income?

How has buy-to-let changed?

The government has clamped down on the buy-to-let market in recent years with changes to the tax system. 

Together, these tax and regulatory changes have led some landlords to reconsider whether buy-to-let still fits their plans, with a number choosing to sell up in recent years.

Increased taxes for buy-to-let landlords

In April 2016, it added a 3% surcharge in stamp duty on additional properties, including second homes and buy-to-lets. After the 2024 Autumn Budget, stamp duty for second properties and buy-to-let homes rose from 3% to 5%. 

Since April 2020, landlords cannot deduct the interest they pay on their mortgage before paying tax, which gave higher-rate taxpayers 40% tax relief on their mortgage payments. 

Now, landlords get a flat-rate tax credit based on 20% of their mortgage interest. While this doesn’t negatively impact basic-rate taxpayers, it affects landlords who are higher and additional-rate taxpayers. 

Landlords also have to declare the income used to pay their mortgage on their tax return, while under the old system, they could declare rental income after deducting mortgage repayments. This apparent income rise may push some into a higher-rate tax band, which means a bigger tax bill.

Increased regulatory costs for buy-to-let landlords

As well as higher taxes, there are also more regulatory costs for landlords.

In October 2025, the Renters' Rights Act came into force, introducing new rights for tenants. Reforms will be introduced in three phases.

Here is a summary of the main changes:

Phase 1: 1 May 2026

• A ban on Section 21  'no-fault' evictions.

• An end to fixed-term tenancies: They have been replaced by rolling tenancy agreements, with a two-month notice period.

• Tighter rules on rent increases: Rent can only be increased once a year, and tenants can challenge rental increases in a ‘first-tier’ tribunal.

• A ban on rental bidding wars: Landlords won’t be allowed to accept bids over the advertised rent.

Phase 2: From late 2026

• A new private rental sector database with an annual charge to help councils enforce rules and standards.

• A new Private Rental Sector Ombudsman, funded by landlords. This will handle complaints from tenants and support landlords with compliance.

Phase 3: Compliance by 2035

• Stricter regulations on the standards of rental homes, which will include a new decent homes standard for private rental properties.

Lower capital gains tax rate for buy-to-let landlords

In a spot of good news for landlords, capital gains tax (CGT) on property was cut in April 2024 for residential property from 28% to 24% for higher and additional rate taxpayers.

While the rate of CGT was increased in the Autumn Budget (2024), it only saw rates charged on investments and other chargeable assets equalised with those already being paid by the owners of second properties.

Multiple dwellings relief for stamp duty, which applies to buying more than one property in a single transaction, was abolished from 1 June 2024.

Making Tax Digital

From 6 April 2026, landlords with gross property and self‑employment income over £50,000 (2024/25 tax year) must also comply with HMRC’s new Making Tax Digital service. 

This means keeping digital records and submitting quarterly updates to HMRC using approved software and replaces the annual Self Assessment tax return. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

How have buy-to-let profits changed?

Mortgage interest relief is no longer available, so many landlords have seen their profits significantly fall – in particular, higher-rate taxpayers. 

As they can no longer receive 40% tax relief on their mortgage payments, their tax relief is halved. 

These changes are particularly challenging for landlords with interest-only mortgages paying higher tax rates. 

Here’s an example of how their tax has changed – it’s for a landlord paying £500 a month in mortgage interest and earning £1,000 a month in rent (assuming the landlord has exceeded their personal allowance through other earnings).

Is buy-to-let still a worthwhile investment?

The answer to whether buy-to-let is still a worthwhile investment goes beyond the issue of tax.

To a large extent, it depends on your personal goals and the type of investment you’re looking for.

Despite tax increases, rental incomes are still rising more than house prices.

Being a landlord can still be profitable, especially if you buy in the right area. Office for National Statistics (ONS) figures show an average rental increase of 3.3% in the 12 months to June 2026, reaching £1,388 per month, with England’s average at £1,446. 

However, the figures were unchanged from May 2026 and the ONS says that rent inflation has generally been slowing since December 2024 due to changes to stamp duty brought in in April 2025. 

Here are some pros and cons of using buy-to-let to generate a return.

Advantages of buy-to-let

• You’ll earn rental income, but the location is important. In some areas of the UK, such as Sunderland, Aberdeen and Burnley, rental yield is as high as between 8% and 9% (as of March 2026), while in other areas, it is lower.

• In London, the average rent inflation was 7.7% between 2023 and 2024, indicating a huge growth in potential rental income. However, rent inflation in the capital slowed to 2.2% in the 12 months to June 2026.

• You’ll also benefit from capital growth if the value of your property rises over time

• You can reduce some risks by taking out insurance to cover against loss of rental income, damage and legal costs.

Disadvantages of buy-to-let

• Increased taxes following the various changes over the last decade are reducing landlords’ profits.

• If property prices fall, your capital will reduce. And if you have an interest-only mortgage, you’ll need to make up for any shortfall if the property sells for less than you bought it for.

• You’ll need to factor in the costs of stamp duty, insurance and wear and tear.

• Being a landlord is a big responsibility, and with tenants' rights increasing, it may be harder to evict those causing you difficulties.

• Check out our useful tips before deciding on whether to be a landlord.

• If you sell your buy-to-let property, you’ll face a higher tax bill as the CGT allowance was cut from £6,000 to £3,000 from April 2024.

Our expert says: Why it’s harder to decide on becoming a landlord

Lisa-Marie Voneshen - Senior Content Writer at Unbiased

“It can be tricky deciding whether to become a landlord.

While you’ll benefit from rental income and capital growth, regulatory changes over the last decade have increased the tax burden, making it more expensive to be a landlord.

It’s worth fully understanding the pros and cons of entering the buy-to-let market and determining whether it’s worth it or if you should consider the alternatives.”

Lots of people choose buy-to-let as a retirement income, often taking tens of thousands of pounds out of their pension pot to do this.

If you're considering this, it is vital you speak to a financial adviser first, as accessing your pension pot can have big implications and potential tax penalties.

Should I sell my buy-to-let property?

If rising costs and regulation have changed your numbers, it's worth reviewing whether your property still meets your goals rather than assuming you should hold on by default.

Consider your capital gains tax position, whether rental yield still covers your costs, and what you'd do with the proceeds if you sold.

A financial adviser or accountant can help you weigh this up before making a decision either way.

How do I get started with buy-to-let?

Your journey to becoming a landlord will typically involve these five steps: 

Step 1: Get your finances in order and speak to a financial adviser to decide how much money to invest and the returns you should aim for. Also, speak to a mortgage broker to get the best deal or a mortgage in principle so you’re ready to make an offer when you find the right property.

Step 2: Find your property and get your offer accepted. This might be quicker than buying a home if the property is already rented out, but it might not be. Allow a few months for the process. 

Step 3: Take out insurance. Along with buildings insurance, you’ll want to protect against unexpected costs like injuries to tenants, damage and loss of rent. 

Step 4: Find tenants. You can go through an agency or find your tenants privately. The right option for you depends on how involved you want to be. But remember: even if you hand-pick your tenants and already know them well, draw up a legally binding contract.  

Step 5: Buy-to-let is a hands-on investment. You’ll need to keep reviewing your mortgage and conduct necessary maintenance on the property. You should also make sure that your income from buy-to-let is handled in the most tax-efficient way – an accountant can help. 

Check out our guide to buying to let. 

What are the best cities to buy-to-let in the UK?

These are the 10 buy-to-let hotspots, with the best rental yield, as of March 2026, according to Zoopla.

What are some good alternatives to buy-to-let?

As an investment, buy-to-let has much to offer: a regular source of income plus a potential long-term yield from any increase in the property’s value. 

However, it is a high-maintenance investment, and your asset is locked away for a long time and hard to access. 

So, depending on your investment goals, it is worth considering if any alternatives are a better fit. 

Real-estate investment trust (REIT) 

If you want to invest in the property market without fixing a boiler every other winter, then a real estate investment trust (REIT) might be an option. 

You can pool your funds with others and invest in commercial properties, all through investment companies trading in public markets. 

But these long-term investments usually involve locking your money away for several years. 

That said, it is a more liquid form of investment than directly owning a property. 

Are bonds a good investment? 

Property bonds are a relatively stable, low-risk investment, although some are more risky than others. 

Bonds are essentially loans made by the investor to a borrower (often a government or large organisation) and are repaid over a set period at a fixed rate of interest. 

As well as government bonds (gilts), large companies across the UK offer these investments. You can choose different length bonds, keeping your money tied up for just one year or up to 10 years. 

What is peer-to-peer lending?

Various platforms allow you to offer loans directly to small businesses and individuals. By cutting out the middleman, peer-to-peer (P2P) lending tends to generate higher returns than cash savings or bonds. 

The downside is that the risks are higher than either, and your money isn’t protected by the Financial Services Compensation Scheme (FSCS).

However, this can be a good platform for investors who want to take more risk for the sake of higher potential returns. And of course, you can invest smaller sums than you would in a property.

Are shares a good investment?

Unlike buy-to-let, shares don't require a large upfront deposit, ongoing landlord responsibilities, or ongoing mortgage costs - but they carry their own risks.

Shares are considered high-risk investments, which means they are volatile and likely to fall in value during some periods and rise in others. 

The typical return from shares over the longer term can be rewarding if you’re patient. Your money also isn’t tied up for as long as it is with property. 

But be prepared for a bumpy ride, and don’t invest any money you might need over the next few years. 

You can find out more about investing here.

Get expert buy-to-let advice

In light of regulatory changes over the last decade and higher mortgage costs, it’s important to evaluate whether buy-to-let investments are still worthwhile.

While buy-to-let still offers potential benefits such as rental income and capital growth, it comes with an increased tax burden and additional responsibilities.

The evolving landscape means it’s crucial to weigh these factors against alternative investments that might better suit your financial goals.

Let Unbiased match you with a financial adviser for expert financial advice and personalised guidance to help you make the most informed decision, ensuring your investment strategy aligns with your long-term objectives.

If you found this article helpful, you might also find our article on renting or buying a house informative, too.