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Chris Exley DipFA
Creator of MoneyGeek | Financial Coach | Financial Planner
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MoneyGeek Digest - Issue 10:
7 Reasons Why Buy to Let is Dead
Dear Reader,
I spoke to a 30-year-old last week - builder by trade, sharp as a tack, and had spent years saving a 25% deposit on a £150,000 buy-to-let.
He’d done his homework - scoured Rightmove, lining up some options.
Then we ran the numbers for Stamp Duty on a 2nd home purchase...
£8,000. On a £150,000 property. That was game over - the numbers just didn't stack up.
I've thought about it a lot since - it's such a shame that young, hungry entrepreneurs get knocked back like this.
Unfortunately, that's just the tip of the iceberg.
Buy to Let has been slowly strangled by consecutive governments - and it continues:
The full picture: 7 nails in the coffin for B2L
1/ STAMP DUTY: COST OF ENTRY
In 2016, the government introduced a 3% surcharge on additional property purchases. In October 2024, they raised it to 5% - a 67% increase.
On a £150,000 BTL: £8,000 in stamp duty before you own anything.
In Scotland? Even worse. The Additional Dwelling Supplement is now 8%.
That same property costs £12,000 in purchase tax alone.
2/ SECTION 24: SNEAKY TAX HIKE
Since 2020, higher and additional rate taxpayers can only claim mortgage interest relief at 20% - regardless of their actual tax band.
If you’re a 40% taxpayer, you’re being taxed on money you’ve already paid to the bank. You get 20p back on every £1 of mortgage interest. You paid 40p in tax on it.
That 20p gap doesn’t sound like much. Across a mortgage, compounded over years — it’s thousands.
Weirdly this doesn't apply to Limited Company structures (yet).
3/ MORTGAGE RATES: BREAKING THE CASHFLOW
Average BTL mortgage rates went from ~3.25% in 2021 to ~5.5% by 2024.
On a £112,500 mortgage, that’s an extra £2,500/year going straight to the lender. Not to your pocket. To theirs. And though the Base Rate has increased, lenders margins are now much higher too.
BTL lending volumes fell more than 50% between 2022 and 2024.
The market is telling you something.
4/ STRESS TESTING: YOU CAN’T BORROW WHAT YOU USED TO
Since 2023, lenders need rental income to typically be at least 1.25x your mortgage rate plus 2%, or 5.5% — whichever is higher.
Higher rate taxpayers face even tighter criteria due to the unfavourable tax position.
On many properties across the UK, the rental income simply doesn’t pass. The mortgage gets declined before you’ve even started.
Perhaps that'd not such a bad thing - because if it doesn't meet the lenders stress test - it's probably not a deal worth pursuing anyway.
5/ SECTION 21: LIQUIDITY IS HARDER
Section 21 — the mechanism landlords used to recover their property without proving fault — was abolished in May 2026 under the Renters’ Rights Act.
It used to allow for two months’ notice outside of contract. No reason needed. Gone.
Evicting a difficult tenant is now a full legal process with no guaranteed timeline. That’s a material change to the risk profile of every rental property in England and Wales.
6/ EPC C BY 2030: ANOTHER BILL
Every rental property must reach EPC rating C by October 2030. Around half of the private rental stock currently sits below that threshold.
The average upgrade apparently costs £6,864 - and that’s for properties where it’s achievable. Older, solid-wall properties are considerably more.
7/ A NEW PROPERTY INCOME TAX: THE FINAL NAIL
And to top it all off - from April 2027, rental income gets its own tax rates. And they're higher than everyone else's.
The government is carving out property income as a separate category - taxed at 22% (basic rate), 42% (higher rate) and 47% (additional rate).
That's 2% more than the equivalent rates on employment or trading income, at every level.
The reasoning? People with rental income don't pay National Insurance, so the government wants to "narrow the gap."
Landlords will hand over more of every pound they make — and the Section 24 mortgage relief calculation will also be updated to this new 22% rate, not 20%.
It's not in force yet. But it's in Finance Bill 2025–26. It's coming.
Can it still work?
As a higher or additional rate taxpayer, Buy to Let is tricky to make stack up - even when it looks profitable in your bank account, when you work out the tax liability it can be loss making.
It's tricky to know whether to jump ship too given the Capital Gains Tax implications of selling.
That being said, as you approach retirement, and your income drops below the 40% threshold, it can provide a decent alternative income source outside of your pensions.
As I always say to clients - think about the why, think about the utility this asset will provide and when.
That combination of capital appreciation, the ability to leverage in the future and that secure and consistent income may well be something worth holding on to.
What's your experience with buy to let? Hit reply and let me know.
If you're unsure about where your Buy to Let sits in your wider plan - book in a free 15 minute call with me below and we'll work through the numbers.
Until next time,
Chris
