In 1990, academic Peter Saunders published a book charting the remarkable growth in home ownership rates over the course of the twentieth century.

Deliberately echoing Napoleon’s famous put down of the British as “a nation of shopkeepers”, A Nation of Home Owners tells of how levels of owner-occupancy increased from around 10% in 1914 to around 70% by the turn of the millennium.

But in the decades that followed, another chapter has been added to that story with the flourishing of the buy-to-let market. No longer just a nation of homeowners, Britain has also become a nation of landlords.

Aspirational appeal

No reliable figures are available on the precise number of landlords in the UK, but estimates have previously put the figure at around 2.82 million based on the number of individuals who declared income from a property via their self-assessment tax return.

And, according to one survey, becoming a landlord is an aspiration for many more. It suggests that a third of Britons are drawn to the appeal of buy-to-let ownership. The pull is even stronger among younger adults, with the majority of those aged between 18 and 34 saying they want to become a landlord in the future.

It is easy to see why. In theory, buy-to-lets can offer the potential to generate a steady stream of rental income in a relatively passive way, while also delivering longer-term financial benefit from any appreciation in the value of the property itself.

However, various changes in the buy-to-let landscape have made the reality of becoming a landlord more challenging in today’s market.

Rental market reforms

When it comes to making a property purchase, for example, buyers now have to contend with higher stamp duty rates. This follows an announcement made by Chancellor Rachel Reeves in the Autumn Budget, where the 3% surcharge on additional properties and buy-to-let homes was raised to 5%.

This change to stamp duty followed a series of other reforms to the financial rules governing buy-to-let mortgages that were introduced in April 2020. Prior to this updated framework, interest on mortgage payments could be deducted as an expense when calculating taxable income, while interest relief was applied at your marginal rate − meaning higher and additional rate taxpayers benefited from relief at 40% and 45% respectively.

That is no longer the case. Now, income tax is payable on rental income, which must be declared by a landlord on their tax return. In addition, reliefs have been replaced by a flat-rate 20% tax credit on mortgage interest payments, effectively halving the rate available to higher rate taxpayers.

This situation has been a major factor in many landlords transitioning their buy-to-let investment to a limited company structure, which introduces additional accounting and administrative requirements but means profits are subject to corporation tax at between 19% and 25% rather than income tax at a potentially higher rate.

Keeping pace with change

Another area of taxation relevant to landlords is Capital Gains Tax, which can be payable on profits from the sale of buy-to-let properties. Currently, the tax-free annual CGT allowance stands at £3,000, after which basic rate taxpayers are charged 18% and higher rate taxpayers are charged 24% (reduced from 28% since 6 April 2024).

In recent years, landlords have also had to contend with changes to the cost of mortgage repayments for buy-to-let investments supported by borrowing, which is typically structured via interest-only products. These payments have escalated on the back of a series of rises to the Official Bank Rate, putting a squeeze on yields and profitability.

And although there has been an easing of the base rate in 2025, leading to a corresponding easing of average buy-to-let mortgage rates, they remain well above the historic lows of the not-too-distant past, reinforcing the need for investors to seek out the best available deals via a reputable and knowledgeable broker.

Room for optimism

As well as being at the mercy of interest rates, landlords are also exposed to the vagaries of the property market when it comes to the possible appreciation of their underlying asset. While the outlook for growth here depends on many factors, some are optimistic. Property firm Savills, for example, has suggested house prices will rise by 21.6% by the end of 2028.

Clearly, some of this optimism is being felt among buy-to-let investors. Data from trade body UK Finance pointed to an increase in the number of new buy-to-let loan advances in the final quarter of 2024, up 39.2% year-on-year. Furthermore, average rental yield was revealed to be 7%, up from 6.74% in the same period the previous year.

Meanwhile, separate research from Rightmove puts average potential revenue from buy-to-let properties outside London at a record £1,349 per month.

Weighing up the opportunity

While such figures underline the continued strength of demand in the rental market, it is equally true that supply has partly been curtailed by the ongoing withdrawal of some buy-to-let investors. And with the forthcoming introduction of the Renters’ Rights Bill, which offers greater protections to tenants, it is possible that others will follow suit.

These trends underline how the buy-to-let market has become more complex in recent years. So, while the idea of becoming a landlord continues to hold appeal, and opportunities undoubtedly still exist, investors must have a sound understanding of how the landscape has shifted as well as an appreciation of how it might evolve into the future.

More than ever, this makes it essential for would-be landlords to reflect on whether it is an investment strategy that is aligned to their particular financial goals. And for those who make – or have made – the leap, it is vital to develop a clear plan that is informed by the right professional advice on everything from taxation and mortgage borrowing to insurance if they are to maximise the potential for their rental investment to deliver healthy returns.

This is our understanding of the proposals so far and these may be liable to change as further regulations are introduced. The information supplied is based upon our understanding of current UK law and HM Revenue and Customs (HMRC) practice. Tax law and HMRC practice may change from time to time. The value of any tax relief will depend on the individual circumstances of the investor. The Financial Conduct Authority does not regulate tax advice.

The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or any of its associated representatives shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.