To say the UK property market has been disruptive in recent years is likely an understatement. Rising interest rates and high levels of inflation – coupled with soaring costs of living – have left many landlords less than certain about the future.
There’s no denying that the buy-to-let landscape has changed drastically over the last couple of years, with many changes eating into profits. But does that mean a buy-to-let is no longer a good investment in the UK?
There are certainly more challenges than there used to be, so getting into property management for the first time requires even more careful consideration.
Generally speaking, it can still be worth investing in a buy-to-let property. But it’s important to understand how much the landscape has changed and what the impacts are on the bottom line in today’s era of property management.
In this article, we’ll get into detail about the current market situation, the changes coming into force, tips and strategies for success, and the challenges to watch out for.
Current market overview
As an overview of the property market, there’s a high demand for rental properties across the UK, with money to be made from buy-to-let portfolios.
But the area you invest in makes a big difference to the bottom line, particularly while interest rates are high. The main factors influencing the market today include:
High rental demand
Despite changes in managing a property portfolio in 2025, rental demand continues to soar. In urban areas, the demand habitually outstrips supply.
For landlords, this means vacancies can be filled quickly, with many tenants supplying months of advanced rent just to bag the tenancy agreement.
Differing yields/house prices per region
Regionally, the rental yields fluctuate. While London and the South of England can command higher rent prices (with average London rents sitting at £2,227 and expected to rise), house prices are considerably higher.
This makes it difficult for investors to expand portfolios into London. Growth rates are also stagnating in the South, with the ONS putting house price inflation in London at 11.0% in 2024 (with evidence of house prices actually dropping slightly).
Yet in the north of England and Scotland, rental demand is still high and yields are expected to grow, but property prices are considerably lower. At least 20 UK locations can leave landlords bagging a property for £100,000 or less.
House prices continue to grow in these regions, too, with the ONS putting the northeast house price inflation rate at a huge 6.7%.
Rental rates are lower in the north, with averages at around £710 in the northeast. But the yields are still good (around 8.13%, the highest in the UK) and the asset can continue to appreciate, based on current predictions.
High interest rates
High interest rates on buy-to-let mortgages put a slight downer on things, as it reduces the returns. But the rates have been gradually dropping.
In August 2024, interest rates were 5.25%, but in February 2025, it lowered to 4.5%. The Bank of England is hopeful that interest rates will continue to come down for landlords, as they continue to review the situation every six weeks.
Regulatory and tax changes
Changes in regulations and taxation are a huge looming presence on the property market in 2025. Many changes have already been introduced in recent years, with more changes expected to come. This includes:
Section 24
Since 2017, Section 24 has been phasing in changes to landlord taxation schemes. The gist of the new regulations is that landlords can no longer claim as much tax relief as they used to in the past.
With the introduction of Section 24, landlords must now pay tax on all rental income (at either the 20% basic tax rate or 40% higher tax rate) and then claim back up to 20% of mortgage interest rate costs.
Essentially, this means landlords have to pay more tax upfront on rental properties.
Stamp Duty Land Tax (SDLT)
As per Rachel Reeve’s 2024 budget, stamp duty on the purchase of an additional property is increasing from 3% to 5% above the standard residential rates after 31 March 2025. The standard residential rates are also changing – with lower tax-free limits.
Both of these factors create more financial burdens for landlords, as the upfront investment when buying an additional property (i.e., a buy-to-let) is significantly higher than it used to be.
Energy Performance Certificate (EPC) requirements
Every landlord must have an up-to-date EPC certificate to let a property. Since 2018, the minimum rating for a rental property had to be E or above. This meant homes rated F or G needed to improve their energy efficiency before being rented.
However, new changes have since been introduced. The UK government is proposing mandates for all rental properties to improve their energy efficiency to a grade C by 2030, with new tenancies having to meet the requirements earlier in 2028.
While more than 50% of rental properties won’t be affected by these changes (based on government findings), that still leaves half the market having to fork out to improve energy efficiency.
This can potentially lead to negative consequences for tenants, too, due to improvement costs being passed down via the advertised rent fee.
Buy-to-let investment strategies
Landlords can employ various strategies to manage a portfolio of properties. These strategies are still popular for buy-to-lets in 2025 and are defined as follows:
Long-term rental income vs. short-term capital growth
Different investment strategies offer varying benefits to landlords depending on your financial goals and the risks you’re willing to settle for. The two main strategies are long-term rental income vs short-term capital growth:
- Long-term rental income provides landlords with a steady income stream over long periods, which is ideal for investors who see this as a priority
- Short-term capital growth can offer high profits when you sell the property, which is better for landlords who want to make large returns over time
Landlords should take into account taxation, liquidity of assets, and the risks of market fluctuations when determining the best strategy.
Interest-only vs. repayment mortgages
Landlords can opt for an interest-only buy-to-let mortgage or a repayment mortgage. The main difference is that an interest-only mortgage only pays off the interest of the loan, whereas the repayment mortgage pays off both.
Each option has its pros and cons:
- Interest-only mortgages have lower initial payments, but a high upfront cost at the end of the term to purchase the property, unless you sell or remortgage
- Repayment mortgages have higher monthly payments as you pay off both the loan and the interest, but you own the home at the end of the term
Most landlords opt for an interest-only buy-to-let mortgage, as it offers more cash flow for reinvestment into other properties. But the strategy that works best for you depends on your circumstances and financial goals.
Setting up a limited company
Setting up a limited company to purchase and manage a buy-to-let property is a top strategy for many landlords. But it has its pros and cons. It’s generally seen as better for landlords in the higher rate taxpayers bracket rather than the basic rate.
As a summary of the pros and cons:
- Pros of a limited company include that Section 24 doesn’t apply and you get more tax benefits as a higher rate taxpayer and inheritance tax options, which creates more flexibility and opportunities for portfolio growth
- Cons of a limited company are the additional legal responsibilities, potential tax disadvantages (such as double taxation if taking a salary and higher tax if you’re a basic rate taxpayer), capital gains tax doesn’t apply, and potentially higher interest rates on a buy-to-let
It’s important to weigh the options up carefully depending on how you plan to expand your portfolio in the future and take a salary, and whether you have another job or are in the higher rate taxpayer bracket.
When choosing to set up a limited company, make sure to keep proper and accurate records for tax purposes. Using a property management software can make managing multiple properties easier, with key documents all in the one place.
Challenges facing buy-to-let investors
There are many challenges facing buy-to-let investors; all of which will likely have an impact on your bottom line and how you plan to expand. The key challenges include:
Rising costs
The rising costs, as outlined above, present a challenge to landlords. Alongside the ‘known’ costs (such as higher stamp duty fees and interest rates), there are hidden costs to take into account, too – some of which are difficult to predict.
For example, the renovation work needed for a rental property to achieve an EPC rating of C will vary significantly per property, resulting in potentially high or low investment costs.
Likewise, letting agent fees may increase to coincide with the rising regulations and increased responsibilities. However, these won’t affect landlords managing properties themselves via a property management software.
Tenant demand for high-quality properties
With the changes to EPC ratings and quality standards, the demand for high-quality properties may increase among tenants.
For landlords with older properties that are potentially less efficient and more difficult to renovate, this can create a gaping financial challenge.
Additionally, tenants do want better quality properties, so rentals that aren’t as modern may become less attractive and harder to fill.
That being said, tenants with the option of paying more rent or living in a less efficient property may choose the latter – which is a benefit for landlords.
Stricter tenant protection laws and landlord licensing schemes
The Renters’ Rights Bill coming into force in the spring of 2025 brings substantial changes to how landlords operate and what protections are offered to tenants.
As a summary, the Bill will:
- Remove fixed-term assured shorthold tenancies (ASTs) and make all tenancy agreements periodic
- Limit rent increases to only once per year, communicated via a Section 13 notice
- Abolish section 21 evictions, so landlords can’t serve ‘no fault” notices to regain possession of a property
- Ban rental bidding wars, requiring landlords to decline offers over the advertised price
- Introduce the Decent Homes Standard, so all properties must meet the minimum quality requirements
Other changes will also be introduced, like a new landlord ombudsman to resolve disputes and a private rented sector database. This may create additional burdens on letting agents, leading to higher management fees for landlords.
These risks can be mitigated if landlords opt for a self-management system to manage tenancies and notices themselves, like via a property management software.
FAQs
Is buy-to-let still a profitable investment in 2025?
Yes, buy-to-let can still be a profitable investment in 2025, but it depends on factors such as location, mortgage rates, rental demand, and tax implications. While rising interest rates and increased regulations present challenges, strong rental demand in many UK regions ensures that landlords can still generate income. Strategic planning, such as choosing high-yield locations and improving energy efficiency, can help maximize profitability.
What are the biggest challenges facing buy-to-let investors in 2025?
The main challenges for buy-to-let investors in 2025 include high interest rates, increasing taxation (such as higher Stamp Duty Land Tax and Section 24 restrictions), stricter tenant protection laws, and new energy efficiency regulations. Additionally, managing rising property costs and adapting to changing market conditions require careful financial planning and efficient property management.
How can landlords maximize their returns in the current market?
Landlords can maximize returns by focusing on high-yield locations, optimizing mortgage structures (such as interest-only vs. repayment mortgages), setting up a limited company for tax efficiency, and keeping properties energy-efficient to meet new EPC regulations. Additionally, self-managing properties using property management software can reduce letting agent fees and improve overall profitability.
Is buy-to-let still worth it? : things to remember
- Choose High-Yield Locations : Investing in areas with strong rental demand and high yields is crucial. Northern England and Scotland currently offer lower property prices with solid rental returns, while London’s high prices make entry difficult. Research regional trends to ensure profitability and long-term growth potential.
- Plan for Rising Costs and Taxes : Landlords must factor in higher Stamp Duty, Section 24 tax changes, and potential renovation costs for EPC compliance. Effective tax planning, such as setting up a limited company, can help mitigate financial strain. Staying informed on evolving regulations ensures better financial stability.
- Optimize Mortgage Strategy : Interest-only mortgages provide better short-term cash flow but require a long-term exit plan. Repayment mortgages offer full ownership at the end of the term but with higher monthly costs. Choosing the right mortgage structure depends on investment goals and risk tolerance.
- Stay Compliant with Regulations : New landlord regulations, including tenant protection laws and energy efficiency standards, impact property management. Compliance with the Renters’ Rights Bill and EPC requirements is essential to avoid penalties. Using property management software helps streamline compliance and ensures efficient handling of rental properties.
Protect the environment. Reduce paper consumption and help save the trees as well as save money at the same time. 
