For several years, the prevailing story surrounding buy-to-let has been one of decline.
Higher mortgage rates, increased taxation, more regulation, rising maintenance costs and constant political criticism have encouraged thousands of landlords to reconsider their position. Some have reduced their portfolios, while others have left the private rented sector altogether.
Yet the latest profitability figures tell a rather different story.
Despite everything that has been thrown at the sector, the overwhelming majority of UK landlords are still making money.
Research published during 2025 found that 89% of landlords were generating a profit from their letting activity. Of these, 17% described their profits as substantial, while 72% reported a smaller but nevertheless positive return. Average achieved rental yields had also increased to 6.6%, their highest level in approximately a decade.
More recent research covering the first quarter of 2026 found that 84% of landlords remained profitable, with average yields of approximately 6.5%. That represents a slight reduction from the earlier 89% figure, but it hardly supports the claim that buy-to-let has become universally unviable.
The reality is more nuanced: being a landlord can still be profitable, but profitability is no longer automatic.
Rental yields remain remarkably resilient
The latest UK Finance figures provide further evidence that the fundamental economics of buy-to-let remain positive.
During the first quarter of 2026, the average gross buy-to-let rental yield across the UK reached 7.21%, up from 6.93% during the corresponding quarter of 2025.
At the same time, the average interest rate across new buy-to-let loans fell to 4.71%, while the average interest cover ratio increased from 204% to 221%. The number of buy-to-let mortgages in significant arrears also fell compared with the previous quarter.
These figures suggest that rental income is continuing to provide a workable margin above borrowing costs for many landlords.
However, that margin varies enormously according to when the property was purchased, how much debt is secured against it, the mortgage product being used and the local rental market.
A landlord who bought several years ago, has benefited from capital growth and carries relatively little borrowing will be in a very different position from somebody purchasing their first rental property today with a large mortgage and substantial acquisition costs.
Rents continue to support income
Rental growth has slowed from the extraordinary increases seen during the immediate post-pandemic period, but average rents are still rising.
The Office for National Statistics reported that average UK private rent reached £1,388 per month in June 2026, representing annual growth of 3.3%.
Average rents increased by 3.4% in England, 4.9% in Wales, 1.3% in Scotland and 2.9% in Northern Ireland, although the Northern Ireland figures cover the 12 months to April 2026. Average UK house prices increased by 2.7% in the year to May.
When rental income grows faster than property prices, gross rental yields can improve. This is one reason why landlords buying in areas with relatively affordable property prices and strong tenant demand can sometimes obtain much better income returns than those purchasing more expensive properties in London and the South East.
The rental market is therefore not one national market. A property producing a poor return in one part of the country may cost considerably less and generate a much stronger yield elsewhere.
Location, tenant demand, property type and purchase price remain critical.
Rental income is not the same as profit
Landlords should nevertheless treat headline figures with caution.
A gross rental yield simply compares the annual rent with the property’s value or purchase price. It does not normally deduct mortgage interest, insurance, repairs, letting agent charges, licensing fees, safety inspections, void periods, rent arrears or taxation.
Similarly, the rental income landlords declare to HMRC should not be confused with the amount they ultimately retain.
HMRC figures show that 2.86 million unincorporated landlords declared £55.53 billion of UK property income during the 2023–24 tax year. Average declared property income reached £19,400 per landlord, its highest point in the five-year period covered by the statistics.
That is income rather than profit.
The amount left after expenses and tax can be substantially lower, particularly for highly leveraged landlords who own properties personally and cannot deduct all their mortgage interest in the same way as an ordinary business expense.
The difference between gross income and genuine net profit has therefore become increasingly important.
Debt is one of the biggest dividing lines
The latest landlord research reveals a particularly significant difference between landlords with mortgages and those without them.
Around 90% of unencumbered landlords reported making a profit, compared with 77% of landlords who had borrowing secured against their properties. Larger portfolio landlords were also more likely to report higher levels of profitability.
This does not mean mortgaged property cannot be profitable. Most landlords with borrowing were still making money.
It does, however, demonstrate how heavily mortgage costs influence the final result.
A landlord refinancing from an older, exceptionally low fixed rate can still experience a substantial increase in monthly payments, even though average new buy-to-let rates have fallen from their recent peaks.
Landlords approaching the end of a mortgage deal should therefore review their options well in advance rather than allowing the loan to move automatically onto a potentially expensive variable rate.
Costs have not disappeared
Stronger rents and improving yields should not disguise the pressures facing landlords.
The cost of purchasing an additional property has increased sharply. Higher rates of property transaction tax have made expanding a portfolio more expensive, while insurance, repairs, labour, materials and professional services have all become more costly.
Landlords must also budget for an increasingly demanding compliance regime. Depending on the property and its location, this may include licensing, electrical inspections, gas safety requirements, fire safety measures, deposit protection, energy-efficiency work and local authority enforcement standards.
Void periods and rent arrears also remain real commercial risks. Research covering the first quarter of 2026 found that 43% of landlords had experienced a void and 30% had encountered rent arrears during the preceding year.
A landlord who calculates profitability using 12 uninterrupted months of rent, while making no provision for repairs or non-payment, is unlikely to obtain an accurate picture.
Existing landlords may have a significant advantage
The current market arguably favours established landlords.
Those who purchased before property transaction taxes increased, have built up equity and understand their local rental market may be able to generate sustainable income even after allowing for higher costs.
Experienced portfolio landlords can also spread risk across several properties. One unexpected repair or short void period may be disruptive, but it is less likely to eliminate the income from the entire portfolio.
New investors face a more demanding calculation. They must account for the purchase price, deposit, transaction tax, legal fees, mortgage costs, initial repairs and compliance expenditure before the first tenant pays any rent.
Buying the wrong property at the wrong price can leave very little margin for error.
So, is being a landlord still profitable?
For most landlords, the answer remains yes.
Between 84% and 89% of landlords have recently reported profitable letting activity, gross rental yields remain historically strong and average rental income continues to increase.
But buy-to-let is becoming more professional, more specialised and less forgiving.
Profitability increasingly belongs to landlords who:
- purchase at a price supported by realistic rental income;
- understand the difference between gross yield and net return;
- control borrowing and refinance carefully;
- maintain adequate reserves for repairs, voids and arrears;
- select locations with sustainable tenant demand;
- remain compliant; and
- treat property as a long-term business rather than a source of effortless passive income.
The landlords struggling most are likely to be those with excessive borrowing, weak yields, insufficient reserves or properties facing major improvement costs.
The wider lesson for government
The fact that most landlords remain profitable should not be interpreted as evidence that further taxes and regulatory costs can be imposed without consequences.
A landlord does not have to be making a loss before deciding that the financial return is no longer worth the work, risk and regulatory exposure involved.
If governments continually reduce the return available from providing rented housing, more landlords will sell. That reduces the number of homes available to tenants and places further upward pressure on rents.
The current figures show that buy-to-let remains viable. They do not show that the private rented sector is immune from damaging policy.
Landlords are still making money because many have adapted, restructured their borrowing, raised rents, purchased more selectively and managed their properties more professionally.
The conclusion is not that being a landlord is easy.
It is that, despite years of higher taxation, regulation and political hostility, professionally managed rental property can still produce a worthwhile long-term return.
This article is provided for general information only and does not constitute financial, tax, mortgage or investment advice. Individual circumstances vary and appropriate professional advice should be obtained before making financial or property investment decisions.