Nicolette Booth was always hopeful that the value of her flat in Earlsfield, south London, would rise in time – after all, property in the capital had been a safe bet for many years and more than doubled in value over the past two decades. Plus, in the meantime she’d earn a nice income from renting it out.
The 42-year-old bought the flat to live in herself more than ten years ago for £490,000. And when she met her husband, Paul-James, and they bought a home together in Hertfordshire, the public relations contractor decided to hold on to it and rent it out.
However, like thousands of UK landlords, an investment that once would have provided a tidy income and been a growing asset has become an increasing burden.
And things look likely to get a whole lot worse. New rules set to come into force in the next few years will heap even more costs and red tape on to a sector that is already under pressure. And rumours are swirling that measures in the Autumn Budget could deal another blow to landlords.
Nearly a third of landlords have sold some or all of their properties over the past 12 months, according to the buy-to-let mortgage lender Aldermore. Of those remaining, many are wondering whether it is worth the hassle.
How did we get here – and what could destroy the buy-to-let market for good?
For Mrs Booth, the Renters Rights Bill, due to become law by early 2026, will be the last straw.
This will ban ‘no fault’ evictions, which means landlords will no longer be able to evict tenants without giving a valid reason, such as wanting to sell the house or move in themselves. Landlords will not be able to evict tenants – even if they have a valid reason – for the first 12 months of the tenancy. At other times they will need to give four months’ notice.
Nicolette Booth tried to sell the home for £500,000 earlier this year, just £10,000 more than it was bought for, but after her buyer pulled out unexpectedly she put it back on the rental market
The controversial Bill will also restrict landlords to one rent increase a year, and require them to give tenants two months’ notice before doing so.
The Bill will also ban landlords from locking renters in to fixed-term contracts. Instead, tenancies will be periodic, which means tenants can leave at any time by giving two months’ notice.
Mrs Booth fears this will make tenant changeovers more frequent. ‘The hassle of new tenants moving in and out is the worst bit.’ she says. ‘It just takes up a huge amount of time and effort.
‘Sometimes the new tenants want new furniture, sometimes they don’t want any furniture.
‘Last time around, my husband and I had to take two days off work to get the flat ready before the new tenants moved in.’
She adds: ‘The main thing putting me off in the future is that you won’t be able to tie renters into a contract. It means renters could leave our flat every few months.’
While the rental income means Mrs Booth has been able to turn a small profit most years of between £8,000 and £10,000, helped by having an interest-only mortgage and good tenants, she says that it’s no longer worth the hassle.
She tried to sell the home for £500,000 earlier this year, just £10,000 more than it was bought for, but after her buyer pulled out unexpectedly she put it back on the rental market.
Lewis Crompton, a landlord based in Lincolnshire, has decided enough is enough. He owned 12 properties but over the past two years has whittled that down to eight
‘We had loads of viewings, but when our eventual buyer went AWOL we decided we couldn’t afford to have it vacant for any longer,’ she says. ‘So we re-let it and also remortgaged to a two-year fix. We will try to sell it again either when that ends or our current tenants leave.’
She and her husband would rather put the money into something that doesn’t come with so much admin and take up so much time. ‘We are looking for a hassle-free alternative and will likely move any proceeds from the eventual sale into a stocks and shares Isa, as well as using it to pay down the mortgage on our current home,’ she says.
It’s hard to think of a group of taxpayers who have been worst-hit by extra costs and regulations in recent years.
For the past decade, successive governments have piled on heavy-handed rules that have wrapped landlords up in red tape and eaten away at their profits.
The most recent blow came in October when the Government added a further 2 per cent stamp duty surcharge on top of the extra 3 per cent landlords already pay.
It means an investor buying a £300,000 property would owe an eyewatering £20,000 in tax. If they bought a £600,000 property they would pay £50,000 in stamp duty.
But the bad news for landlords doesn’t end there.
Treasury officials are rumoured to be looking at charging National Insurance on rental income as they hunt for taxes to raise to help balance the books. This would be charged on top of income tax. This could mean, for example, that a basic rate taxpaying landlord with a £30,000 salary, earning £20,000 in rental profit a year could see their annual tax bill on the rental income rise from £4,000 to £5,600.
The Renters’ Rights Bill will prohibit the practice of ‘rental bidding’ – where a landlord sets a ballpark rent and chooses the tenant who makes the highest offer
The Renters Rights Bill could be the tipping point for many landlords, according to Jeremy Leaf, an estate agent in London.
He also thinks the Bill could end up doing more harm than good if it causes landlords to sell up, as this would create more competition for properties and drive up rents.
‘The Renters Rights Bill is weighted too much towards tenants,’ he says.
‘If it is going to take a long time and be so costly to remove a tenant, then that will be the final straw for a lot of landlords. The result will be a lot of people trying to sell the properties which were let out – and they may find exiting isn’t as easy as they had hoped.’
The Bill will also prohibit the practice of ‘rental bidding’ – where a landlord sets a ballpark rent and chooses the tenant who makes the highest offer.
Where tenants refuse to leave after antisocial behaviour, damaging a property, or falling into major arrears, landlords should still be able to go to court, as under the current system – but this can be a lengthy and costly process.
If a tenant believes the rent increase is above the market rate, they’ll be able to challenge this at a tribunal, which will determine what the level should be.
Buy-to-let owners also face being listed on a public landlord register under the Bill. Some are worried this will allow tenants to criticise them online – which has been described as a ‘Trustpilot for landlords’ – while others say it is unfair that dishonest tenants won’t face the same public shaming.
They could even be subject to a landlord ombudsman, which would handle complaints from tenants and force landlords to pay them compensation.
Property investors also face having to upgrade properties to meet punitive eco targets, or be banned from renting them out.
The Government has proposed that all rental homes in England upgrade to an Energy Performance Certificate rating of C or above by 2030 – although it hasn’t yet been made law.
EPC ratings run from A, the best, to G, the worst. The Government’s own figures suggest 2.6million privately rented homes have a rating of D or below, which amounts to 60 per cent of all buy-to-lets.
‘Twenty years ago there was more of a golden age for buy-to-let, when property prices were rising more rapidly, with landlords benefiting from good income and capital growth,’ says Mr Leaf.
‘But things have changed, taxes have increased, regulation has become more onerous, and you can’t offset the same level of expenses against income [for tax purposes] as was the case.
‘We are finding that the more established landlords are staying for now, but newer landlords are not taking the place of those who are exiting the sector, which is worrying.’
It is also becoming more expensive to be a landlord. Those with mortgages – about 60 per cent of landlords – have seen mortgage rates spike from 3 per cent at the start of 2022 to 5.25pc today, according to rates scrutineer Moneyfacts and based on a five-year fixed rate.
Someone taking out a £200,000 interest-only mortgage on a five-year fix will typically pay £875 a month today, compared to £500 a month just three years ago.
Landlords also pay to maintain, furnish and decorate their properties, and the cost has been soaring due to an under-supply of skilled tradesmen and costs of materials.
For some landlords, keeping their head above water proves too difficult a task.
Buy-to-let mortgage repossessions are up by 11 per cent year-on-year, according to the latest data from UK Finance.
‘We’re seeing the private rental sector become a more challenging environment, for both landlords and renters,’ says Jon Cooper, director of mortgages at Aldermore.
‘Increased regulation, high mortgage rates and high maintenance costs mean more landlords are being squeezed out of the market. A continued exodus will place greater strain on an already stretched sector, further impacting tenants.’
And the pain is not over when they sell up. Landlords will often face capital gains tax if the property has gone up in value.
This is charged at 18 per cent for basic rate taxpayers, and 24 per cent for higher rate taxpayers – but with any significant gain, people are likely to pay most of it at the higher rate.
This is because a capital gain is added to your normal income to determine the tax rate you pay. If you make a significant gain – especially if you’ve owned the property for many years – it is likely to push you into a higher tax band than the usual one.
This is despite the fact that you can deduct all the costs involved with buying and selling the property from your capital gains tax bill. Frozen income tax bands mean that growing numbers of workers are shifting into a higher tax band – the number of higher-rate taxpayers is expected to increase by 500,000 this tax year to more than seven million, according to official figures.
To make things even worse, there is more admin from next year. From April 6, 2026, those earning over £50,000 from self-employment or property income will need to start filing their taxes every three months, rather than once a year as part of its shift towards digital record-keeping for income tax.
The Making Tax Digital scheme will require these landlords to keep records throughout the year and report their income to HM Revenue and Customs (HMRC).
Lewis Crompton, a landlord based in Lincolnshire, has decided enough is enough. He owned 12 properties but over the past two years has whittled that down to eight. ‘I want to shift away from buy-to-let as it’s hard to just break even,’ he says.
His buy-to-lets are in more affordable Northern areas such as Middlesbrough and Doncaster, and each make a relatively modest £650 a month in rent.
With rents less than half the UK average of about £1,365, according to Rightmove’s data, Mr Crompton, 35, says unexpected costs can quickly wipe out all his profit.
‘The cost of turning over tenants is high, as is the price of repairing anything. You might be making a 10 or 12 per cent yield, but that is easily wiped out,’ he says.
‘If you have to replace a boiler, it might mean you haven’t made any profit that year.’
He got into buy-to-let partly because he didn’t trust the Government to provide a pension that would look after him in his old age. He also thought he could benefit from house price growth and rental income.
Instead, he has decided that it isn’t worth the hassle – especially given the extra admin being piled on to landlords.
‘I do think the Government is penalising good landlords and making things harder for them. Meanwhile, the bad landlords won’t obey the rules anyway,’ he says. ‘Landlord licensing feels like an extra tax on good landlords.
‘If I sell my portfolio, I’ll transition to buying commercial property to rent out, invest in social housing on long-term leases or put the money into the stock market.
‘I already invest in the stock market so I would move more money over to that, where I could make better profits.’
Who can blame him?
Are you making or losing money as a buy-to-let landlord? ed.magnus@thisismoney.co.uk
