Is It Worth Being A Landlord Now With Various Tax Increases And Budget Changes

7th December 2025

The tax and regulatory environment for landlords (private and commercial) in the UK has changed substantially over recent years, and that has a big impact on whether property investment remains "worth it" today.

A walk through the full-range of major taxes and costs facing landlords now for residential (private) and commercial letting and then give a balanced view on whether it's "worth it" compared to a few years ago, and the circumstances under which it may make sense to sell up. Individual circumstances always vary so any decisions need very careful thought. But lets take look at the issues.

Main taxes and costs landlords now face (private & commercial letting)
For residential (private) letting / buy-to-let

Income tax on rental income

Rental income (after allowable expenses) is taxed as regular income.

Since the introduction of Section 24 (fully in effect since April 2020), landlords can no longer deduct full mortgage interest and many finance costs before tax. Instead they get a 20% tax credit on interest paid.

That credit does not fully offset the loss of deductibility for many — especially higher-rate taxpayers — meaning taxable income increases even if actual profit (net cash flow) is low or zero.

From April 2027, the government has scheduled another increase: property income tax rates for landlords will rise by 2 percentage points (so basic-rate becomes 22%, higher rate 42%, additional 47%).

Compounding this: personal income tax thresholds are frozen (until 2031 at least), which means inflation or nominal rental increases may push you into higher tax bands even if real income hasn't risen.

Upfront tax when buying a property: Stamp Duty / SDLT (or regional equivalent)

In England & Northern Ireland, residential investment/second-home purchases pay an extra surcharge (the "Higher Rates for Additional Dwellings" — HRAD). As of October 2024, this surcharge rose from 3% → 5%.

Meanwhile, the standard "nil-rate" threshold for SDLT is returning to £125,000 from April 2025 (it had been £250,000 temporarily).

That makes acquiring new buy-to-let properties significantly more expensive upfront, especially for mid-market properties typical of many rentals.

In Scotland and Wales, different taxes apply (e.g., LBTT in Scotland), often with similar surcharges on second homes — meaning these issues are UK-wide, though specific rates vary by nation.

Capital Gains Tax (CGT) on sale

When you sell a rental property (or other residential investment), you pay CGT on the profit (gain), after allowable costs and the small annual exemption.

As of 2025/26 the rates for individuals are 18% (for gains falling within the basic-rate band) and 24% (for gains above that).

The annual exempt amount (allowance) is now just £3,000 (per person) — much lower than previous years — so many sales will trigger CGT.

If the property was ever your main home, some reliefs may apply (e.g. Private Residence Relief), but for pure rental properties such relief is seldom relevant.

Administrative & compliance burden (and risk of penalties)

Since tax laws have become more complex (mortgage interest restrictions, stricter reporting, reliefs removed), many landlords need to keep careful records and possibly hire accountants.

The risk of investigations or tax corrections has risen: a recent compliance wave by HM Revenue & Customs (HMRC) resulted in a record amount reclaimed from landlords — highlighting the risk for those not fully compliant.

For commercial letting (and commercial property owners)

Commercial property taxation is more complex and differs in some respects from residential. Some of the relevant taxes/costs:

Corporation tax (if you hold commercial property via a company): many investors choose to hold commercial real estate via companies — meaning profits (including rental profits and eventual sale gains) are taxed under corporation tax rules rather than personal income tax/CGT.

Stamp Duty / Transaction taxes on buying commercial property: for non-residential/commercial property, lower SDLT or different rates often apply (though specifics depend on price and type).

VAT, business rates, maintenance/management costs, commercial leases, compliance burdens — these are often more significant in commercial property, though not strictly "taxes" in the same sense.

Capital Gains Tax (or potentially corporation tax on gains when selling) — depending on ownership structure. For individuals disposing of commercial property, CGT rules apply; for companies, gains may be under corporation tax.

Because commercial property has different risk/return dynamics (lease terms, tenant risk, potential periods of vacancy, business-rate burdens, different maintenance obligations), the attractiveness vs. residential buy-to-let depends heavily on the asset, location, and management model.

How the situation has changed compared to a few years ago — and what that means for "is it worth investing now?"

A few years ago (pre-2020, maybe especially before Section 24), buy-to-let investing looked very different: landlords could often deduct mortgage interest fully, tax burdens were lower, and some reliefs applied that made buy-to-let more profitable. Since then:

Full interest deductibility has gone replaced by a modest 20% tax credit.

Upfront acquisition costs (stamp duty / SDLT + surcharge) have increased — making entry into buy-to-let more costly.

CGT after sale remains significant, and the tax-free allowance for gains is much smaller than in the past.

New changes (e.g. announced in late 2025) mean rental income tax rates will increase further from 2027 onwards.

On the upside: for some, the cut in higher-rate CGT from 28% → 24% (in 2024) might make selling slightly more attractive than under older rules.

Compared to a few years ago, the "yield" and net return from residential buy-to-let have been squeezed significantly. The entry costs, ongoing tax burdens, and post-sale tax liabilities all weigh more heavily. Unless rental income and property appreciation are strong (and carefully managed), many landlords will find returns thinner than in the past.

On the other hand, some of the "tax pain" is now baked in — so current valuations/prices already reflect that discount. For landlords who own outright (or have small mortgages), and in areas with strong rental demand or capital growth prospects, buy-to-let might still make sense — though the risk/reward balance is generally less favourable than, say, 5-10 years ago.

For commercial property: it remains more nuanced. Because commercial property can offer longer leases, different tenant profiles, and potentially corporate-tax treatment (if held in a company), it can still make sense — but the added complexity, risk, and management burden tend to make it more suited to larger, professional investors rather than "accidental landlords."

When it might make sense to sell up — and when it might still make sense to hold/invest

You might want to consider selling if:

Your rental yield (after loan interest, costs, maintenance, tax, and other expenses) is low or negative.

You expect further tax hikes or regulatory burdens (e.g., rising income tax on property income, possible new levies on high-value homes) that could erode profitability further.

You're exposed to market risk: property values stagnating or falling, or rental demand weakening (e.g. economic slowdown, interest-rate rises, changes in demand) — in which case locking in gains now may be attractive.

You're near retirement or want liquidity — selling a property can free up capital for other investments (stocks, pensions, businesses) that may offer better risk/return or lower hassle.

It might still make sense to hold (or invest) if:

You have good long-term rental demand (e.g. in a city with housing pressure), and rental yields remain decent after costs and tax.

You can hold property via a limited company (or are considering doing so) — in some cases corporate-owned property can make more sense for larger portfolios because mortgage interest remains deductible as a business expense, potentially improving net returns.

You believe in long-term capital appreciation (property price growth), and you're comfortable with letting property run for several years to ride out economic cycles.

You value the diversification and “hard asset” nature of bricks-and-mortar a real, tangible asset that doesn't move in perfect sync with equities or bonds.

The answer depends heavily on your personal situation — but in many cases, residential buy-to-let is a tougher investment now than a few years ago, so I'd only recommend holding or investing if you're long-term, financially robust, and have a good buffer for tax/risk.

If you’re a small-scale landlord (e.g. one or two units), relying on rental income to pay a mortgage or provide income it may well be worth considering selling while you can (especially if property values have risen).

If you have a larger portfolio, can restructure through a company, or own commercial property (with different tax dynamics), then property investment might still make sense but you need to be more strategic, hands-on, and tax-aware than landlords of 10-15 years ago.

Examples for Highland
Some thoughts but examples may vary with personal circumstances.

Buy-to-Let in the Highlands (2015 vs 2025)
Assumptions used:

3-bed house price: £250,000

2-bed flat price: £180,000

Typical rent (Highlands):

3-bed house: £1,100/mo

2-bed flat: £900/mo

Expenses (maintenance, insurance, voids, etc.): 20% of rent

Mortgage LTV: 75%

Mortgage rates:

2015: ~3%

2025: ~5.5% (average BTL rate today)

Key Interpretation of the Results
2015 — Strong Positive Cashflow

Both properties produced healthy annual cashflow:

3-bed house: ~£4,935/yr

2-bed flat: £4,590/yr

Mortgage interest was low, rents covered everything comfortably.

2025 — Major Profit Squeeze

With higher interest rates, reduced tax relief, and higher costs:

3-bed house:

Net cashflow collapses from £4,935 → £247 per year

That’s basically break-even, and that’s before tax.

2-bed flat:

Cashflow falls from £4,590 → £1,215

Still positive, but far tighter.

After Scottish income tax, many landlords would actually be loss-making on a cash basis once tax on “paper profits” is factored in (because mortgage interest is no longer fully deductible).

What This Means for Highlands Market
When it’s still worth holding/investing

If properties are owned mostly mortgage-free

If you’re long-term and banking on capital growth

If you want a stable asset that hedges inflation

If your rental demand is high (tourist areas, Inverness, Fort William)

When it may be better to sell

If your properties are highly mortgaged

If you rely on rental income for cashflow

If tax pushes you into negative cashflow

If you want to diversify into more liquid investments

Highlands-specific insight

The Highlands have:

Strong rental demand

Low supply of family housing

High yields compared to cities

...but the tax system and mortgage rates matter more than local demand. This is why many landlords in the Highlands are also reassessing their portfolios.