Can you still make a profit as a landlord in 2026? According to Allison Thompson, chief lettings officer at Leaders, the fundamentals of buy-to-let investment remain valid, though the market has grown more complex. The asset class continues to offer a mix of ongoing income and capital growth, but it requires a long-term view and a deep understanding of the expenses involved.
Know the costs before you buy
Investing in rental property demands capital at the start and throughout ownership. You must calculate every expense to determine if the income will cover the bills. Up-front costs include deposits, legal and survey fees, and stamp duty, which is charged at a 5% higher rate in every band in England. You also need to budget for refurbishment, furnishing, and compliance with health and safety and fire regulations. Once the property is tenanted, ongoing costs include insurance, agent fees, maintenance, and a 3% allowance for potential void periods. To break even, a landlord needs a deposit of at least 25% to 30% to secure a property where rent covers monthly costs and tax with a surplus for income.
Working with a qualified estate and letting agent is often the most reliable way to gauge current and future demand. Different locations attract different tenants; some areas are heavy with students, while others appeal to working professionals or families. Buying in a spot with strong demand that exceeds supply is essential for keeping the property occupied and achieving market rent.
Use leverage to build a portfolio
Even if you have the cash to buy outright, taking out a mortgage can improve returns. Mortgage payments reduce monthly profit, but they allow your own capital to grow across multiple units. For instance, buying three £270,000 properties with a 30% deposit instead of one all-cash purchase can generate the same rental profit while delivering three times the capital growth. Because buy-to-let mortgages have different criteria than standard residential loans, finding a regulated, qualified broker is advisable.
Read Also: UK house prices rise for first time since May
Property taxation is a complex area. A property tax specialist or wealth adviser can help you structure your investment for maximum efficiency and explain how income extraction might affect your overall tax bill. It is also critical to plan an exit strategy for when you sell or pass the property on. The tax and legal teams should review these plans to ensure you maximise long-term benefits.
From April next year, landlords with a turnover exceeding £30,000 will face Making Tax Digital rules, requiring quarterly digital submissions to HMRC. Even if you are not at that threshold yet, adopting the system early is a sensible move as it eventually applies to all self-employed earners. Thompson notes that these rules are not just a bureaucratic hurdle; they fundamentally change how landlords must approach bookkeeping, shifting the focus from annual filing to real-time data tracking and digital record-keeping.
How is the current market performing from an investment returns perspective?
Zoopla reported that average annual rent growth for the UK was 2.1% in June. Around three-quarters of rental areas are growing faster than that. A few particularly poorly performing, more expensive locations with negative growth are pulling the average down.
Of England’s major cities, the top three performers are Newcastle, Liverpool, and Leeds. In some of the more affordable areas, rents are rising by 5% or more. Carlisle and Halifax are up 9.1% and 6.5% respectively in the last year.
This strong rent inflation is being driven by a continuing supply issue. Every region still has between 20% and 30% fewer homes available to rent than before the pandemic. Despite slowing wage growth, that supply shortfall is still fuelling rent growth.
Read Also: Sugee Group Launches 52-Acre Waterfront Hub in Thane
Zoopla expects the average UK rent growth for 2026 to be between 2% and 3%.
What’s happening to property values?
Zoopla’s latest report shows the average UK house price has risen 1.5% in the past year. There was a 0.6% increase in the last quarter alone. This suggests the market is stabilising after the post-pandemic rate rises.
The North of England is growing well above average. Prices are up 3.4% in the North East and 3.6% in the North West.
With inflation over the last 12 months averaging 3.3%, but currently at 2.8% and on a downward trajectory, landlords in most of the country should see their combined investment returns staying positive.
