What this calculator works out
A buy-to-let is a property you buy to rent out. The headline numbers people quote, like the rental yield, leave out most of what decides whether it pays: the mortgage, the running costs, the empty weeks between tenants, and tax. This calculator puts all of them together and shows what you’d actually keep each month, what it costs to buy, whether a lender is likely to lend, and what the whole investment could return if you sold later.
It follows the rules in each part of the UK: Stamp Duty Land Tax in England and Northern Ireland, Land and Buildings Transaction Tax in Scotland, and Land Transaction Tax in Wales, plus income tax for Scottish and non-Scottish taxpayers.
Section 24: how landlords’ mortgage interest is taxed
If you own the property yourself, the rent is added to your other income and taxed at your usual rates. You can take off running costs, such as the letting agent, repairs and insurance, but not your mortgage interest. Since 2020 that interest only earns a tax credit of 20% of its cost (this rule is often called Section 24). For a basic-rate taxpayer the credit roughly matches the tax the interest would have saved; for a higher-rate taxpayer it covers only half, so the same property leaves them less.
For example, take a property that makes £10,000 a year after running costs, with £6,000 of mortgage interest, owned by two different landlords in England in the 2026/27 tax year:
| Salary from a job | Tax on the rent (Section 24) | If the interest were deductible | Left after interest and tax |
|---|---|---|---|
| £30,000 | £800 | £800 | £3,200 |
| £60,000 | £2,800 | £1,600 | £1,200 |
The basic-rate landlord pays the same either way. The higher-rate landlord pays tax on the full £10,000 at 40% and gets back only 20% of the interest, so they keep much less from the same property. Enter your own salary in the calculator to see where you fall.
From 6 April 2027, property income in England, Wales and Northern Ireland will be taxed at its own rates of 22%, 42% and 47%, and the credit for mortgage interest rises to 22%. Property income will also count after your salary, so more of it can fall into a higher band. The calculator uses these rules from year 2, which is why your tax often rises in the second year even before rents change.
Buy-to-let through a limited company vs in your own name
A limited company can deduct all its mortgage interest, and it pays Corporation Tax on its profits: 19% on profits up to £50,000, rising to 25% from £250,000. That can leave more profit to reinvest. But the money is the company’s, not yours: taking it out as dividends means paying dividend tax, and company buy-to-let mortgages can cost more. A company also pays the additional-property rates of purchase tax even if you don’t own a home.
Most landlords fund a company by lending it the deposit and buying costs, as a director’s loan. The company can repay that loan tax-free before paying any dividends, so in the early years the rent often reaches you without any personal tax at all. Choose “A company” under “Who buys it?”, or “Compare both” above the results, to see this for your numbers: what the company keeps, what reaches you, and, with the break-even income, how much you’d need to earn for a company to come out ahead.
At the end you can keep the company for its next purchase, or close it. When a company is closed, what’s left after repaying your loan usually reaches you as a capital gain, taxed at 18% or 24%. But if you carry on a similar business, such as letting other property, within two years, HMRC can treat the payout as a dividend instead. How to take money out of a company is a decision to make with an accountant.
Worked example
Say you buy a £250,000 property in England to let at £1,250 a month, with a £62,500 deposit and an interest-only mortgage at 5%. You already own your home and earn £40,000 a year.
- Upfront: £15,000 of stamp duty at the additional-property rates, so £80,100 in cash with the deposit and fees.
- Year 1: after 2 empty weeks you collect £14,423 of rent. Running costs take £3,385 and mortgage interest £9,475, leaving £1,564 before tax.
- Tax: income tax is charged on £11,038 (the rent minus running costs, but not the interest), then a £2,208 credit for the interest comes off. You pay £154 and keep £1,410, about £118 a month.
- Year 2: with the April 2027 property rates the tax rises to £542, even though the rent grew.
- A company instead: it would pay £15,000 of stamp duty too, but deduct all its interest and pay Corporation Tax on the profit. Lending it your £80,100 and closing it after a sale in 10 years, you’d gain about £49,152 after all tax, against £67,214 in your own name. With these numbers, a company only comes out ahead if your other income is above about £49,000.
The yield looks healthy at 6.0%, but the cash you keep is small: most of the rent goes on the mortgage and costs. That’s typical, and it’s why the price growth you assume matters so much to the final result.
Will a lender lend?
Buy-to-let lenders mostly judge the rent, not your salary. They check that the rent covers the mortgage interest with room to spare, usually by 125% for companies and basic-rate taxpayers and 145% for higher-rate taxpayers. They test it at a higher rate than you’ll pay: the Bank of England expects them to assume at least 5.5%, or your rate plus two points if that’s higher, unless you fix for five years or more. If the rent fails the test, you’ll need a bigger deposit, which the calculator shows as the most this rent could support.
Before you buy
Try the numbers with less rent, more empty weeks and a higher rate: the “If things change” box shows how quickly a small monthly profit can become a loss. In the worked example, most of the total gain comes from the property’s value rising rather than the rent, so try a lower growth rate too. Compare the result with what the same cash could earn elsewhere with no tenants to manage; our index investing calculator shows how a spread-out investment has done over time.