Introduction.
Buy-to-let remains one of the most popular ways to build long-term wealth in the UK, but the rules have changed more in the last two years than in the previous ten.
New tenancy laws, higher Stamp Duty on additional homes and changes to how rental income is taxed all affect how much you can borrow, how you should own your properties, and what you keep.
The way borrowing is structured has a lasting effect on returns. Whether you are buying a first rental flat or refinancing an established portfolio, this guide sets out how lenders think and the decisions worth making before you buy.
Rules on tax and tenancies are complex and change often. We work alongside your accountant and solicitor, and recommend you take specialist tax advice on ownership structure.
Typical rental cover lenders require, measured against mortgage interest at a stressed rate.
01Buy-to-let in 2026.
Three changes define the market today: the Renters’ Rights Act, higher Stamp Duty on additional homes, and rising tax on rental income.
The Renters’ Rights Act
From 1 May 2026, in England:
- Section 21 “no-fault” evictions ended. Landlords seeking possession must use a specific ground under Section 8.
- Fixed-term assured tenancies were replaced by periodic tenancies. Tenants can leave with two months’ notice.
- Rent increases are limited to once a year using the statutory Section 13 process, with at least two months’ notice.
Still to come: a mandatory private rented sector database, phased in from late 2026, a landlord ombudsman, and the Decent Homes Standard extended to private rentals.
Stamp Duty on additional homes
Since 31 October 2024, the surcharge on additional residential properties in England and Northern Ireland has been 5%, on top of standard rates. It applies to limited companies as well as individuals.
Tax on rental income
From April 2027, income tax on property income is due to rise by two percentage points, to 22%, 42% and 47% for basic, higher and additional-rate taxpayers.
What it means
Returns now depend far more on structure, financing and the right property. Lenders have adapted too, and the gap between the best and worst terms for the same landlord has widened.
02How lenders assess rental property.
Buy-to-let lending is based mainly on the rent the property can achieve, not your salary. Lenders test whether that rent comfortably covers the mortgage interest at a higher, stressed rate.
The rental stress test
The interest cover ratio (ICR) is the rent as a percentage of the monthly interest at the lender’s stress rate.
| Borrower | Typical ICR |
|---|---|
| Limited company | 125% |
| Basic-rate taxpayer | 125% |
| Higher or additional-rate taxpayer | 145% |
Stress rates and ratios are set by each lender. Five-year fixed rates often allow a lower stress rate.
Worked example
A £300,000 mortgage, stressed at 5.5%, has monthly interest of £1,375. At 125% the property must let for at least £1,719 a month; at 145%, £1,994.
What else lenders look at
- Deposit: usually 25%; some lenders accept 20% or less at higher rates.
- Personal income: some lenders set a minimum, others none.
- Experience: first-time landlords and first-time buyers have fewer options.
- Top-slicing: some lenders use your personal income to support a shortfall in rent.
- Credit and existing borrowing across your portfolio.
03Personal or limited company?
For many landlords, especially higher-rate taxpayers, buying through a limited company has become the default. It is not right for everyone.
| Personal ownership | Limited company (SPV) | |
|---|---|---|
| Mortgage interest | Relief given only as a basic-rate tax credit | Generally deductible as a business expense |
| Tax on profits | Income tax at your marginal rate (rising by 2% from April 2027) | Corporation tax at 19% to 25%, then tax when you extract profits |
| Mortgage choice | Widest range of lenders | A broad, competitive specialist market |
| Rates and fees | Often slightly lower | Often slightly higher |
| Stamp Duty | 5% surcharge applies | 5% surcharge applies |
| Selling | Capital gains tax at 18% or 24% | Corporation tax on gains within the company |
| Paperwork | Simpler | Company accounts, filings and director duties |
Moving existing properties
Transferring properties you already own into a company is treated as a sale. It can trigger Stamp Duty and capital gains tax, and needs specialist advice first.
Adviser’s note
We arrange finance for both and will show you how lenders treat each, but the ownership decision should be made with your accountant.
04Portfolio landlords.
Once you own four or more mortgaged buy-to-let properties, lenders treat you as a portfolio landlord and assess your whole portfolio, not just the property you are financing.
What lenders will ask for
- A property schedule: values, loans, lenders, rents and rates.
- A business plan and cash-flow forecast.
- Recent personal tax returns or company accounts.
- Assets and liabilities, and how voids would be covered.
Some lenders apply a stress test across the whole portfolio; others look at average loan-to-value or overall rental cover.
Keeping the portfolio lendable
- Stagger fixed-rate end dates so you are not refinancing everything at once.
- Track which properties are carrying the weakest rental cover.
- Keep your schedule up to date; it speeds every application.
Mortgaged buy-to-let properties at which lenders apply portfolio landlord underwriting.
Growing with equity
Rising values and repayments create equity that can fund deposits on further purchases, through a remortgage or a further advance. Lenders will want to see the overall portfolio still meets their criteria after the new borrowing.
Adviser’s note
Lenders that suit a landlord with two flats are often not the ones that suit a landlord with twenty. We review your whole portfolio and plan refinancing around it.
05Property types and lender appetite.
Lenders are comfortable with standard flats and houses let on a single tenancy. Beyond that, choice narrows and criteria vary widely.
| Property type | What to know |
|---|---|
| HMOs | Houses in multiple occupation may need a licence. Specialist lenders often value them on rental yield, and some ask for prior landlord experience. |
| Multi-unit freehold blocks | Several flats on one title. Lenders may value on an investment basis rather than the sum of the flats. |
| Holiday lets | Lent on projected holiday income. The furnished holiday lettings tax regime was abolished from April 2025. |
| Student lets | Often treated like HMOs, with demand linked to the local university. |
| New-build flats | Lenders may cap loan-to-value and limit exposure to a single development. |
| Above commercial premises | Accepted by many lenders depending on the type of business below. |
| Short leases | Lenders want enough years left on the lease beyond the mortgage term. |
Before you offer
Talk to us before committing to anything unusual. A property that only a handful of lenders will accept can affect both your rate today and your options when you come to refinance or sell.
06Costs, tax and compliance.
Stamp Duty on a buy-to-let
| Purchase price | Standard | With 5% surcharge |
|---|---|---|
| £250,000 | £2,500 | £15,000 |
| £300,000 | £5,000 | £20,000 |
| £500,000 | £15,000 | £40,000 |
England & Northern Ireland, as at October 2026. Non-UK residents pay a further 2%.
Running costs to budget for
- Letting and management fees
- Landlord insurance and buildings cover
- Maintenance, service charges and ground rent
- Void periods between tenants
- Licensing, where your council requires it
- Accountancy, and for companies, filing costs
Your legal obligations
| Gas safety | Annual check by a Gas Safe engineer |
| Electrical safety | Inspection report at least every five years |
| Energy performance | Minimum EPC rating of E; the Government plans to raise this to C by 2030 |
| Deposits | Protected in a government-approved scheme |
| Right to rent | Checks on every adult tenant |
| Smoke and CO alarms | Fitted and tested at the start of each tenancy |
Lenders check too
Some lenders will not lend on properties below a certain EPC rating, and more are offering better rates on energy-efficient homes.
07Refinancing and growing.
The end of a fixed rate is the moment to review the whole picture: rate, rental cover, structure and whether equity can work harder.
Product transfer or remortgage
Staying with your lender can be quick, with no new valuation or rental assessment. Moving lender may give a better rate or let you raise capital, but means a fresh application and stress test.
Raising capital
Many landlords release equity to fund deposits on further purchases. Lenders will assess the rent against the larger loan, so rental cover is often the limiting factor.
Rent reviews
Under the Renters’ Rights Act, rent can be increased once a year using the statutory process. Rent levels directly affect how much you can borrow when you refinance.
How far ahead many lenders let you secure a new rate before your current deal ends.
Avoid the reversion rate
Buy-to-let reversion rates are often well above fixed rates. We contact you before your deal ends so the new rate is ready on time.
Selling or restructuring
If returns no longer justify a property, selling and reinvesting, or changing ownership, can be options. Each has tax consequences to check with your accountant first.
08A landlord’s case, illustrated.
A higher-rate taxpayer buying a fourth flat
Three flats held personally with three lenders, all on fixed rates ending within a year of each other. Looking to buy a £320,000 flat.
- Challenge
- Personal ownership at 145% rental cover limited the loan
- Structure
- New purchase through a limited company, tested at 125%
- Deposit
- Funded by releasing equity from one existing flat
- Portfolio
- Fixed-rate end dates staggered across three years
- Outcome
- Purchase completed, with a refinancing plan for the whole portfolio
This example is illustrative and does not describe a real client.
09Checklist and glossary.
Documents to have ready
- Photo ID and proof of address
- Proof of income: payslips, SA302s or accounts
- Bank statements showing your deposit
- Property schedule for any existing rentals
- Tenancy agreements and rent evidence
- Existing mortgage statements
- Company documents, if buying through an SPV
- Business plan and cash flow, for portfolio landlords
- Your solicitor’s and accountant’s details
Glossary
- ICR
- Interest cover ratio: rent as a percentage of stressed mortgage interest.
- Stress rate
- The higher notional rate lenders use to test affordability.
- SPV
- A limited company set up only to hold property.
- Portfolio landlord
- A landlord with four or more mortgaged buy-to-lets.
- HMO
- House in multiple occupation, let to several unrelated tenants.
- Top-slicing
- Using personal income to support a rental shortfall.
- Further advance
- Extra borrowing from your existing lender.
- Section 8
- The route to possession now that Section 21 has ended.
Related: Buy-to-Let / Investment · All guides · Calculators