Buy-to-let in 2026: the tax, the surcharge, and the sale

Section 24 explained with real numbers, why a higher-rate landlord can lose money on a property that makes a cash profit, plus the additional-property stamp duty, the April 2027 surcharge, and capital gains tax when you sell.

One lever among many. Optimising your plan shows every lever, which ones apply to you and how they interact.

Buy-to-let used to be a tax-efficient way to borrow. Three changes since 2016 reversed that for most higher-rate landlords, and the arithmetic now needs doing before the offer, not after the first tax return.

Section 24: tax on money the lender received

Since April 2020 mortgage interest is not deductible from rental profit. Tax is charged on rent less running costs at your marginal rate, and a 20% credit on the interest is given instead. For a basic-rate landlord the two cancel. For a higher-rate landlord they do not: on a £250,000 flat with a 75% interest-only mortgage at 5.5%, £1,250 a month rent, two empty weeks, a 10% agent and £2,000 of costs, the property makes £668 of cash before tax, and the higher-rate landlord pays £2,495 of tax on it (including the April 2027 property surcharge), losing £1,827 a year in cash. The same property in a basic-rate taxpayer's hands nets £315. The buy-to-let calculator runs the whole chain; the rental income tax calculator the tax line alone.

Stamp duty on the way in, capital gains on the way out

An additional property pays the surcharged rates: on £250,000 in England that is £15,000 rather than £2,500, and it is not refundable for a rental. The stamp duty calculator gives all three nations. On sale, the gain after buying and selling costs and improvements is taxed at 18% and 24% after the £3,000 exemption, with private residence relief only for months you lived there plus the final nine, and the return and payment due within 60 days: the property CGT calculator works it through.

What still makes it work

Capital growth, which is a bet rather than an income; a basic-rate taxpayer or a lower-earning spouse holding the property; a small or no mortgage; or a company structure, which restores interest deductibility at the cost of corporation tax, dividend tax on extraction and mortgage rates that are higher for companies. None of these is a reason to buy; each is a condition under which the numbers can still add up. The Hundred Summers app carries a rental property through every projected year with its income, costs, mortgage and eventual sale, so the whole holding period is judged, not one year's yield.

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