Your first buy-to-let: the honest version

This is for UK first-time landlords who've heard property is a good earner and want the real numbers before committing a deposit. No hype, no shortcuts. Just how a buy-to-let actually works in July 2026, including the bits that eat your profit. It's about buying a whole property, in your own name, and doing the job properly.

The mortgage: how lenders actually decide

Buy-to-let mortgages work differently from the one on your own home.

• Deposit: typically 25% of the purchase price. Some lenders go lower, many want more. Budget 25% (LTV mechanics are covered in the deposit guide).
• The stress test: lenders don't care much about your salary. They care whether the rent covers the mortgage with room to spare. This is the interest coverage ratio (ICR): the rent usually has to be 125% to 145% of the monthly interest, and not at your actual rate, but at a higher "stressed" rate the lender picks. Basic-rate taxpayers tend to get tested at 125%; higher-rate at 145%, because tax eats more of their rent (see Section 24 below).
• Interest-only is normal. Most BTL mortgages never repay the loan. You pay interest each month and the debt stays put. Why? It keeps monthly costs down, helps you pass the ICR test, and interest is what gets tax relief. The catch: at the end of the term you still owe the full amount. Your exit is selling, remortgaging, or paying it off some other way. Have a plan for that on day one, not year twenty-four.

We can't and won't name lenders, products or rates. Speak to an FCA-authorised broker: a whole-of-market one, ideally one who does BTL all day.

The cost stack nobody puts in the spreadsheet

Rent minus mortgage is not your profit. Here's what actually comes off:

• Letting agent / management: 10 to 15% of rent (plus VAT, plus tenant-find fees). Self-managing saves this but costs your evenings.
• Maintenance: budget roughly 1 month's rent per year, more for older stock. Boilers do not break in summer.
• Voids: empty months between tenants. You still pay the mortgage, council tax and utilities. Budget at least 2 to 4 weeks a year.
• Insurance: specialist landlord insurance, not normal home insurance.
• Compliance certificates: annual gas safety check if there's gas; an electrical safety report (EICR) at least every 5 years; a valid EPC. Plus smoke and carbon monoxide alarms, deposit protection within 30 days, and Right to Rent checks in England. Every certificate, deadline and penalty is in the landlord compliance checklist.
• Licensing: larger HMOs (5+ people from 2+ households) need a mandatory licence, and many councils run additional or selective licensing that can cover ordinary single lets. Fees run to hundreds of pounds. Check your council's scheme before you buy. Fines for unlicensed letting are brutal.
• Buying costs: in England and Northern Ireland you pay a 5% stamp duty surcharge on top of standard SDLT rates because it's an additional property. On a £180,000 purchase that's £9,000 extra before you've collected a penny of rent (full bands in the stamp duty guide; Scotland and Wales have their own, different surcharges).

Worked example: the £180,000 flat

Illustrative numbers. Your rates and rents will differ.

• Purchase price: £180,000. Deposit at 25%: £45,000. Add the 5% SDLT surcharge (£9,000), legal and survey costs, and call it £56,000+ cash in.
• Mortgage: £135,000 interest-only. At an illustrative 5%, interest is £562/month.
• Rent: £950/month (£11,400/year).
• ICR check: a lender stressing at 5.5% and 145% needs rent of £135,000 × 5.5% × 1.45 ÷ 12 = £897/month. £950 scrapes past. This is why plenty of deals that "look fine" fail at application.

Now the year's cash:

About £73 a month, before tax, on £56,000 of your cash, and one broken boiler wipes out the year. That's not a reason not to do it; long-term the return usually comes from rent rising and (maybe) the property's value. It is a reason to stop believing spreadsheets that show £400/month "passive income". For how to run gross, net and cash-on-cash properly, see the yield guide.

The Renters' Rights Act: the rules changed on 1 May 2026

The Renters' Rights Act 2025 got Royal Assent in October 2025 and its first phase came into force on 1 May 2026. If you buy now, you're a landlord entirely under the new regime:

• Section 21 "no-fault" evictions are abolished. You can only end a tenancy on specific legal grounds (serious arrears, antisocial behaviour, you're selling, you're moving in, etc.).
• All tenancies are periodic. No more fixed terms. Existing ASTs converted automatically on 1 May 2026; new ones are rolling from day one. Your tenant can leave with 2 months' written notice at any point, so "they signed for 12 months" is no longer a thing.
• Selling or moving in: 4 months' notice, and you can't use these grounds in the first 12 months of a tenancy.
• Rent rises: once a year, by formal notice (Form 4A), 2 months' notice, no rise in the first 12 months, and the tenant can challenge it at tribunal.
• Money and lettings rules: maximum 1 month's rent in advance; rental bidding is banned, so you must advertise a price and can't take more; pet requests can't be unreasonably refused.

In practice: pick tenants carefully, keep evidence of everything, and price rent correctly from the start, because your levers afterwards are limited. The possession grounds, penalties and what's still coming are all in the Renters' Rights Act guide.

Section 24, in one paragraph

Since April 2020, individual landlords can't deduct mortgage interest from rental income. Instead you get a basic-rate (20%) tax credit on the interest. Basic-rate taxpayers are broadly unaffected. Higher-rate taxpayers get squeezed hard: in the example above, a 40% taxpayer is taxed on £7,632 of "profit" (rent minus costs, interest ignored), owing about £3,053, minus a £1,350 credit (20% of £6,750 interest) = roughly £1,703 tax on £882 of actual cash. Yes: the property can lose money after tax while HMRC calls it profitable. It can also drag your taxable income up, threatening things like the child benefit taper. Run this before you buy.

Personal name vs limited company

Companies escape Section 24 (a company deducts all its mortgage interest and pays corporation tax), which is why many higher-rate taxpayers buy through one. But companies bring their own costs: mortgage choice is narrower and rates typically higher, there are accounts and filing fees every year, and getting money out (salary or dividends) triggers a second layer of tax. For one property held personally by a basic-rate taxpayer, a company is often pointless; for a higher-rate taxpayer planning several, it often wins. The maths turns on your income, your plans and how long you'll hold. Talk to an accountant before buying, not after.

EPC rules: now, and 2030

Right now a rental in England and Wales needs a minimum EPC rating of E, with a £3,500 cost cap and an exemptions register if the property can't get there. That's changing: in January 2026 the government confirmed all private rentals must reach the equivalent of EPC C by 1 October 2030, measured against new EPC metrics, with a £10,000 cost cap per property and 10-year exemptions where the cap is hit. (Confirmed policy, but the regulations making it law haven't been laid yet; the government is targeting 2027 for those.) If you're viewing a D or E-rated property, price the upgrade works into your offer, or you're buying someone else's £10,000 problem.

Mistakes people make

• Underwriting on rent minus mortgage. Use the full cost stack or don't bother.
• Forgetting the 5% SDLT surcharge and other buying costs when working out cash needed.
• Ignoring the stress test and losing a purchase at mortgage application.
• Buying an EPC D/E without pricing the 2030 upgrade.
• Not checking council licensing before completion.
• Higher-rate taxpayers discovering Section 24 in January, at self-assessment time, after buying in their own name.
• Assuming you can get the property back easily. Post-May 2026, you can't. Tenant selection is the whole game.
• Skipping the accountant and broker to save a few hundred quid on a six-figure decision.

Sources: gov.uk: Renters' Rights Act overview · gov.uk: Renters' Rights Act Information Sheet 2026 · legislation.gov.uk: Renters' Rights Act 2025 · gov.uk: Tax relief changes for residential landlords · gov.uk: Domestic private rented property minimum energy efficiency standard · gov.uk, Improving the energy performance of privately rented homes (consultation outcome, Jan 2026) · gov.uk: SDLT residential rates · gov.uk, Renting out a property: landlord responsibilities

Education, not financial advice. For mortgage advice, speak to an FCA-authorised broker.

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