Is Buy-to-Let Still a Good Investment in 2025?

For decades, purchasing property with the intention of renting it out was an appealing strategy for building wealth. There were several reasons why this was the case:

• House prices were more affordable, relative to earnings
• Banks were more willing to lend, with lending criteria relaxed
• Ability to offset mortgage interest and other costs against rental income, providing greater tax efficiency
• Landlords could rely on a steady rental income while benefiting from excellent capital growth
• Low-interest rate environments (2010-2020 specifically)

But the landscape has shifted.

What’s Changed?

Over the past decade, a series of tax and regulatory changes have made owning a buy-to-let property less rewarding – and far more complex:

• Mortgage interest tax relief was gradually phased out from 2017, replaced with a 20% tax credit, reducing the benefit for higher earners.
• A stamp duty surcharge of 5% on second properties came into effect in October 2024, significantly increasing upfront costs.
• Reforms to Private Residence Relief (PRR) in 2020 and recent Capital Gains Tax changes in 2022/23 have narrowed the scope for reducing tax when selling.
• Income tax thresholds have been frozen, meaning more of your rental profit may now fall into the higher or additional rate tax bands.

In short, landlords are now taxed more at every stage: when buying (stamp duty), while letting (income tax), and when selling (capital gains tax) than they ever were before.

Rising Costs, Lower Margins

On top of tax changes, higher interest rates have pushed up mortgage costs – yet you can no longer fully deduct those costs from your rental income. That means thinner margins.

In addition, local councils have also increased the level of compliance checks, all of which eat into profits. These include gas and electrical safety checks, EPCs and fire safety checks. Some councils are also now applying increased council tax during vacancy periods, increasing the financial pressure of void periods for landlords. 

Hassle Factor

The ongoing responsibility of property maintenance should not be ignored, especially if run alongside full-time jobs and family commitments. The alternative involves handing over 10–20% of rental income to a managing agent to do it for you. What was once seen as a passive income stream often turns into an active business.

Risk and Diversification

There’s also the concentration risk. A buy-to-let property typically requires a large upfront investment in a single, illiquid asset – with no guarantees it will outperform other options.

Compare this with the last few decades of global equity returns, especially when invested through diversified portfolios with compounding and lower tax drag. Even when accounting for leverage in property, the case for BTL is not as clear-cut as it once was.

So, Is Buy-to-Let Still Worth It?

That depends on your goals, your time, and your broader financial plan.

For some, property still plays a useful role – especially if you’re willing to treat it like a business and have the time/energy to ensure it remains profitable. But for many, today’s environment demands a more critical lens. The days of easy profits and tax-friendly investing are behind us.

Before making any decisions about buy-to-let in today’s environment, it’s worth stepping back and looking at the bigger picture.

A Financial Planner can help you:

• Model the real returns from a buy-to-let – including costs, tax, and time involved
• Compare these against other options such as pensions, ISAs, or a diversified investment portfolio
• Understand how property income might affect your wider tax position – particularly if you’re approaching retirement or already drawing income elsewhere
• Evaluate how a single, illiquid asset fits into your overall financial plan – especially if you’re thinking about risk, liquidity, or future legacy

Working with a planner ensures any decision fits your goals, works in harmony with your other assets, and gives you the clarity to move forward with confidence. If you would like some advice, please contact us here.

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Date written: 26^th July 2025

Approved by Evolution Wealth Network Ltd on 28/07/2025.