But how much of the rent do you actually get to keep?
Once you’ve paid the mortgage, maintained the property, covered insurance and paid tax, you might be left with a lot less that you expected.
With new regulations and higher taxes, it’s essential to understand the costs before investing in buy to let (BTL).
So, what should you budget for?
Mortgage payments and fees
For many landlords, the mortgage is their biggest regular expense.
Most BTL mortgages are interest-only, meaning your payments cover the interest but don’t reduce the debt. You’ll need a plan to repay the loan at the end of the term, perhaps by selling.
You’ll also need to budget for mortgage arrangement fees, valuation costs and legal fees when taking out a new deal, which can easily add up to £2,000.
BTL lenders usually require rental income to cover at least 125% of mortgage interest payments. They also stress-test borrowing against higher interest rates.
Lenders such as The Mortgage Works, winner of Best Buy-to-Let Mortgage Lender at the Your Mortgage Awards 2025/26, offer mortgages for landlords, while Paragon, winner of Best Professional Buy-to-Let Mortgage Lender, caters for those with larger portfolios or more complex borrowing needs.
Tax on your income
Rental income is taxable, and landlords are facing higher tax bills after October’s Autumn Budget 2026.
From April 2027, property income tax rates in England, Wales and Northern Ireland will rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.
Landlords can’t deduct mortgage interest from taxable rental profits. Instead, they receive a basic-rate tax credit, meaning higher- and additional-rate taxpayers face bigger tax bills than if they could deduct interest in full.
It’s complicated, so it’s always worth taking professional tax advice, plus landlords operating through limited companies are subject to different tax rules.
There are also costs when buying and selling, including significantly higher stamp duty land tax on additional homes and potentially capital gains tax when you sell.
Insurance
You’ll need appropriate landlord insurance, rather than standard buildings insurance, and mortgage lenders usually require this cover to be in place.
According to MoneySuperMarket’s landlord insurance data, around half of customers paid £253 or less for buildings and liability insurance.
You might also consider contents insurance for furnished properties and rent guarantee insurance against missed payments.
Maintenance and property standards
From leaking taps to broken boilers, repairs are an unavoidable part of being a landlord.
You’ll also need to meet legal requirements covering gas and electrical safety, smoke and carbon monoxide alarms, as well as the general condition of the property.
Propertymark found that most letting agents report annual maintenance costs of up to £1,000, including safety checks, but your costs could be higher depending on the property.
Government proposals could also require privately rented properties to meet an Energy Performance Certificate (EPC) C-equivalent standard by October 2030. If your property doesn’t comply (and isn’t exempt), you could face expensive insulation or heating upgrades or a large fine.
Letting agent fees
Many landlords use an agent to find tenants, collect rent and handle maintenance.
Full management typically costs around 10% of the rent, depending on the agent, location and services.
Managing the property yourself can save you money, but means taking on those responsibilities, including making sure your paperwork and contracts are watertight.
New costs under the Renters’ Rights Act
If you own a rental property in England, you’ll also face new requirements under the Renters’ Rights Act.
For example, the new private rented sector database will require you to register your properties, with an annual fee of £65 per property. Registration is being introduced in stages from December 2026.
A new landlord ombudsman scheme will bring extra membership requirements and costs.
Empty properties and missed rent
You can’t assume you’ll receive rent every month.
During empty periods between tenancies, you’ll still need to pay the mortgage, insurance and other bills, potentially including council tax and utilities.
Rental arrears are another risk. If tenants fall behind with payments, you’ll still need to cover your costs while resolving the situation, which could take many months.
How much profit could you actually make?
According to the Office for National Statistics (ONS), average monthly private rent in the UK reached £1,406 in September 2026, equivalent to £16,872 per year.
Say you receive this amount on a house you bought for £250,000, for example, with a typical £187,500 interest-only mortgage at an illustrative rate of 5.5%.
Your annual finances might look like this:
| Income and costs | Annual amount |
| Rental income | £16,872 |
| Mortgage interest (5.5%) | £10,312.50 |
| Letting agent fees (10%) | £1,687.20 |
| Maintenance and safety checks | £1,000 |
| Insurance | £250 |
| Remaining before tax | £3,622.30 |
But there’s still income tax to pay.
Assuming you’re a basic-rate taxpayer in 2027/28, with the full mortgage interest tax credit available, your taxable rental profit would be £13,934.80.
Tax at 24% would be £3,344.35. Applying the basic-rate mortgage interest tax credit at 24% would reduce this by £2,475, leaving a tax bill of approximately £869.
After costs and tax, you’d keep around £2,753 per year, or £229 per month.
Don’t forget that this assumes year-round occupancy, rent paid in full and no major unexpected repairs. Just one month’s lost rent could wipe out more than half your profit.
Build a financial buffer
A rental property can still be a worthwhile long-term investment, but you need to be realistic about the costs.
Calculate your likely income and costs, allowing for higher mortgage rates, empty periods and unexpected repairs.
A financial buffer helps you manage these costs without relying on the next month’s rent.
Because successful BTL investing isn’t about how much rent you receive, but what’s left after paying the bills.
