Buy to let in 2026 — is it still worth it after Section 24, rising costs, and Renters Rights?

For individual landlords with mortgaged properties, the past decade has been one of steadily rising tax costs and increasing regulation. The question "is buy-to-let still worth it?" is one we see constantly on landlord forums, and the answer in 2026 is: it depends entirely on your numbers. Let us run the real maths.

Section 24 — the mortgage interest restriction explained

Section 24 of the Finance (No. 2) Act 2015 is fully implemented and has been since April 2020. It means that individual landlords can no longer deduct mortgage interest from rental income when calculating taxable profit. Instead, they receive a 20% tax credit on mortgage interest paid.

This sounds similar, but for higher-rate taxpayers it is devastating. Here is why:

Old system (pre-2017): Rental income £18,000. Mortgage interest £9,000. Taxable profit = £9,000. Higher rate tax (40%) = £3,600.

New system (2026): Rental income £18,000. Taxable profit = £18,000 (interest NOT deducted). Higher rate tax (40%) = £7,200. Minus 20% credit on £9,000 interest = £1,800 credit. Net tax = £5,400.

The same property, the same rent, the same mortgage — but £1,800 more tax per year. For many higher-rate taxpayer landlords with heavily mortgaged properties, Section 24 has turned profitable rentals into tax losses or near-break-even propositions.

Four big things landlords must know in 2026

1. Stamp Duty surcharge on second homes

Since October 2024, the stamp duty surcharge on second residential properties increased from 3% to 5%. For a £250,000 buy-to-let purchase in 2026, this means:

• Standard SDLT: £2,500 (2% on £125,001–£250,000)
• 5% surcharge on full purchase price: £12,500
• Total SDLT: £15,000

Use our stamp duty calculator to see the exact cost for any purchase price.

2. Making Tax Digital — landlords affected from April 2026

If your rental income exceeds £50,000, you must be compliant with Making Tax Digital for Income Tax from April 2026. If above £30,000, from April 2027. This means digital record-keeping and quarterly HMRC submissions. Non-compliance brings fines of up to £200 per missed submission. Check our MTD checker to see if you are affected.

3. Renters Rights Act

The Renters Rights Act, which passed in 2025, abolishes Section 21 "no-fault" evictions, introduces periodic tenancies by default, and strengthens tenants' rights. While this does not directly affect your tax bill, it does affect the risk profile of buy-to-let investing and the administrative burden on landlords.

4. Capital Gains Tax on disposal

When you eventually sell your buy-to-let property, Capital Gains Tax applies on the gain above the £3,000 annual exemption. The CGT rate for residential property in 2026/27 is 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. You must report and pay CGT on UK residential property within 60 days of completion. Use our CGT calculator to estimate the tax on a sale.

Does buy-to-let still work in 2026?

Yes — under certain conditions. The properties that still generate genuine after-tax returns in 2026 share these characteristics:

• Low loan-to-value (LTV): Properties with small or no mortgages are not affected by Section 24 because there is little or no mortgage interest to deduct. The Section 24 restriction only hurts if you have significant mortgage costs.
• High yield locations: Northern cities (Liverpool, Manchester, Leeds) still show gross yields of 7–9%, leaving sufficient margin after all costs.
• Limited company ownership: Companies are not subject to Section 24 — they can still deduct mortgage interest fully. However, the additional costs of running a company (corporation tax, dividend tax when extracting profits) and the higher mortgage rates for limited companies must be factored in.
• Basic-rate taxpayers: For landlords who remain basic-rate taxpayers even after including rental income, Section 24 has much less impact because the 20% credit broadly compensates for the tax.

Should you transfer your property to a limited company?

Transferring an existing personally-owned rental property to a limited company is treated as a disposal for both CGT and stamp duty purposes — meaning you would pay CGT on any gain made since purchase, and stamp duty again on the transfer. This makes it economically prohibitive for most landlords with large existing portfolios.

For new purchases, especially for higher-rate taxpayers planning a significant property portfolio, buying through a limited company from the outset is increasingly common. Use our buy-to-let calculator to compare personal versus company ownership at your expected rental income level.

Frequently Asked Questions

I am a basic-rate taxpayer — does Section 24 affect me?

Less so. The 20% credit on mortgage interest broadly cancels out the 20% income tax on the disallowed interest for basic-rate taxpayers. The main risk is if your rental income pushes you into the higher-rate band — in which case you would face the full Section 24 impact on that portion of income.

Can I still deduct repair costs?

Yes — Section 24 only restricts the deduction of finance costs (mortgage interest and other loan interest). All other legitimate landlord expenses remain fully deductible: repairs and maintenance, letting agent fees, insurance, professional fees, council tax during voids, and so on. Capital improvements (which increase the property's value rather than just maintaining it) are not immediately deductible but reduce your CGT liability when you sell.

My rental property makes a loss — do I still pay tax?

Under the old system, a genuine rental loss could be carried forward against future profits. Under Section 24, your taxable profit may actually be positive even if your cash flow is negative (because mortgage interest is not deductible). You still pay income tax on the positive taxable figure. You may also be able to use the income tax credit to reduce the bill — but it does not create a refundable credit if the credit exceeds your tax liability.

Do I need to register for Making Tax Digital?

If your total property income exceeds £50,000 in 2025/26 or £30,000 in 2026/27, yes. Check the threshold against your gross rental income (before deducting expenses). Use our MTD checker for a personalised assessment.

Is holiday letting (Furnished Holiday Lettings) different?

Furnished Holiday Lettings (FHL) status gave landlords a range of tax advantages including capital allowances and pension contribution treatment. However, from April 2025, FHL status was abolished — holiday lets are now taxed in the same way as standard residential buy-to-let. This removed a significant advantage for those with Airbnb-style short-term lets. All properties are now subject to Section 24.