We're quitting buy-to-let as we can't make a profit: Everything landlords have to pay, from tax to fixing flats trashed by tenants

Helen Dixon has nothing positive to say about her experience as a landlord.

She is about to put her second buy-to-let property on the market, having sold another earlier this year.

The two-bedroom ex-council flat in Newcastle was bought for £70,000 in 2021 and had been rented out for £650 a month, until the tenant served notice to vacate.

Helen says she and her husband Gary have been left with a trashed flat in need of a new bathroom and kitchen as well as new carpets. It's so bad that Helen fears it may sell for less than they paid for it.

Helen is selling up at a time when landlords face another tax squeeze after the Chancellor decided to increase property income tax rates in last month's Budget.

But even before these changes, Helen says it is difficult to make a profit as a landlord.  

'When you take out all the expenses we were left with very little,' she says. 

Fed up: Helen Dixon and her husband Gary say letting property isn't worth the hassle

This is despite the fact the couple don't have a mortgage to pay on the property, as it is owned outright. 

'After the letting agents took their cut, we were left with £570 a month,' Helen explains. 'Then there was a service charge to pay, that ranged from roughly £250 to £600 a year and also home insurance at just under £200 a year.

'The tenant didn't look after the property so there were also repairs from time to time. We had to replace the hobs on the cooker three times. That costs around £230 each time.

'We had to replace the boiler mid-tenancy. It also needed a new bath panel and a new shower screen at one point. Sending a plumber to fix a dripping tap cost £150 alone.'

In Helen's opinion, letting a property simply isn't worth the hassle any more. 

She says higher taxes and stricter rules on evictions and rent rises under this year's Renters' Rights Act have just made a bad situation even worse.

Helen adds: 'Renting is not passive income. It’s stressful. You get a phone call at 10pm at night saying something has gone wrong.

'Tenants don’t look after property like you look after your own home. Some actively trash it. I have no problem paying my fair share in tax, but it has now just become unfair.'  

Landlord Mark Imray also plans to sell off his buy-to-lets over the next few years as soon as his fixed rate mortgage deals come up for renewal.

Mark says the combination of high interest rates and the punitive tax regime are the key reasons for his planned exit. 

He says letting a property is now simply unviable for landlords with a mortgage. 

'You simply cannot make a sensible profit with interest rates at 5 per cent or more - even with rents at their highest ever level', says Mark.

It comes at a time when landlords are facing higher costs from all directions, from taxes to mortgage rates, and service charges to repair bills. 

But the reality for Mark and Helen alongside many other landlords is they're unlikely ever to even see any profit – that's because there are so many other costs bleeding their property investments dry.

Higher taxes: From April next year, landlords will pay 4 percentage points more tax than they do today on rental income, following increases announced across the past two Budgets

Mortgage interest: £458 per month 

Almost two million landlords in Britain own their properties with a mortgage, and rates have been climbing. 

The average rate on a buy-to-let mortgage is 5.84 per cent this month, according to Moneyfacts, its highest level since January 2024. 

Five years ago, before inflation and global conflicts caused interest rates to spike, landlords could get deals below 2.5 per cent.  

Landlord Mark Imray gives the example of one of the houses in his portfolio that he is planning to sell. A modern two-bedroom home on a new estate in the East Midlands.

It rents for £900 a month, but the £110,000 interest-only mortgage on a 5 per cent rate is now costing him £458 a month, leaving him with £442 of profit - but that is before tax.

Buy-to-let mortgage deals also come with high fees, often between 1 and 3 per cent of the total loan amount.

On a £150,000 mortgage that could mean additional costs of between £1,500 and £4,500.

Given that landlords need to remortgage every two to five years, these fees can snowball.

Lenders can also charge mortgage valuation fees, ranging from £150 to £350 each time a landlord remortgages, and broker fees of around £500. 

Taken together over a five-year time horizon and a typical landlord like Mark could easily find themselves forking out £3,750 every time they remortgage, or about £750 per year.

Extra mortgage fees a landlord may not factor in

What is it?	Average cost	How often?
Average mortgage product fee	£2,000	Every 2 or 5 years
Average mortgage valuation fee	£250	Every 2 or 5 years
Average mortgage broker fee	£500	Every 2 or 5 years

Income tax: Soon to be £286 a month

From April next year, landlords will pay 4 percentage points more tax than they do today on rental income, following increases announced across the past two Budgets. 

Rates will rise from 20 per cent to 24 per cent for basic-rate taxpayers, 40 per cent to 44 per cent for higher-rate taxpayers and 45 per cent to 49 per cent for additional-rate taxpayers.

Taking Mark's property as an example, he makes £442 of profit each month.

As a higher rate taxpayer he pays 40 per cent tax on this profit, rising to 44 per cent from April. He also can't fully offset his mortgage interest costs against his tax bill, instead receiving a 20 per cent tax credit, rising to 24 per cent in April.

Under current tax rules, he pays £268.33 in tax each month leaving him with a small profit of £173.34 a month. 

However, from April that will be further reduced to £155.67 - and this doesn't account for any other expenses. 

Regulatory costs: £750 a year

Landlords have been heaped with extra safety regulations in recent years. 

A gas fuelled home requires a gas safety certificate every year. This costs between £30 and £250 on average, according to MyBuilder.

An Electrical Installation Condition Report needs to be carried out every five years and is required for all rental properties. 

Most EICRs cost between £100 and £400, according to MyBuilder, and these checks can uncover potential issues that need fixing, adding on extra costs.

Some councils are now charging landlords a licence fee in order to let their property out – a new phenomenon that famously caught out the former chancellor Rachel Reeves.

These selective licences vary from council to council but can cost up to £1,000 per property. They last for up to five years.

Landlords who rent out houses of multiple occupancy, properties housing three or more unrelated tenants, also have to secure a licence every five years. These can cost over £2,000 in some cases. 

All landlords in England also soon need to fork out £65 a year for every property they own, in order to register on a new national database.

This is Money calculates that compliance costs alone will cost the typical landlord around £685 a year on average. Add the national database and this rises to £750 from next year.

The costs of landlord compliance

What is it?	Average cost	How often?
Gas safety certificate (for gas fuelled homes)	£150	Once a year
Electrical Installation Condition Report (EICR)	£300	Every five years
Smoke and carbon monoxide alarms	£150	Every 10 years
Energy Performance Certificate (EPC)	£100	Every 10 years
Cost of Making Tax Digital (MTD) software	£150	Once a year if rental income is £50k or more - falling to £20k from 6 April 2028
Landlord database register (coming soon)	£65	Once a year for each property
Additional licencing costs for some landlords depending on council rules and location
Selective licencing scheme	£700	Every five years
HMO licensing	£500 to over £2,000	Every five years

Letting agent fees: £108 a month 

About two thirds of landlords use a letting agent to collect rent and manage the property on their behalf. This typically costs around 10 per cent plus VAT (12 per cent) of the rent received.

Taking 10 per cent plus VAT from a £900 monthly rental income would essentially reduce the landlord's monthly rent by £108, taking it to £792.

But in reality, the average landlord using a letting agent is likely to see their return reduced even further.

This is because letting agents also charge additional fees when they have to find a new tenant. These will include set-up fees, the cost of drawing up an inventory and check-out reports. There is often an end of tenancy clean required even if a tenant leaves the property in good condition.

These one-off fees can mount up to around £1,250 but can be more or less depending on the agent, the location and the property in question.

Most letting agents say around two to three years is a typical average tenancy length, according to Propertymark, a leading membership body for letting agents.  

When factoring all these costs over a long-term time horizon, we estimate a typical landlord will fork out a further £500 a year on these fees alone.

Extra letting fees a landlord may not factor in

What is it?	Average cost	How often?
Lettings fee for marketing/viewings/referencing checks	£600	Every 2-3 years
Inventory fee to lettings agent	£150	Every 2-3 years
Check-in and check-out fee to lettings agent	£150	Every 2-3 years
End of tenancy clean	£350	Every 2-3 years

Repairs and maintenance: £2,000 per year

If a landlord is still managing to make a profit after taking into account the mortgage, taxes and letting agent fees, an unexpected repair can quickly leave them in the red. 

While it's impossible to predict what these will be from year-to-year, general advice is to budget for 1 per cent of the property's value. So for a £200,000 home, that would be £2,000 per year. 

The average cost of replacing a like-for-like gas combi boiler is between £2,500 and £4,000, according to Checkatrade – enough to wipe out a year or two's rental profit for many landlords.

And while a landlord may get lucky for years and have very few repair costs they may find they need to extensively refurbish the property when a tenant moves out meaning all those years of savings are lost in one big renovation. 

Insurance and service charge: £3,145 per year

Landlords will also need to pay buildings insurance and, if the property is furnished, contents. The average they can expect to pay is around £300 a year. 

For those landlords letting out a leasehold property, they'll also have service charges and ground rents to contend with. 

Flat owners in Britain currently face the prospect of paying an average £2,845 a year on service charges, analysis of sale listings in June revealed. 

Void periods: £150 per year

When tenants move out there is often a void period in which the property is empty before the new renter moves in. During that time, the landlord is on the hook for both council tax and utilities.

The average rental void period across England is currently 28 days, according to analysis by Goodlord.

The average Band D property pays £2,392 per year in council tax. Even over the average 28-day void period that could mean a £183.50 bill to cover.

Given tenancies tend to change every two to three years this could leave a landlord out of pocket by an average of £73.40 each year just from council tax alone.

In reality, a void period can feel a lot more expensive if heating and water are not switched off. This could cost about £77 per year on average, assuming a void period happens every two to three years. 

Plus, there's the lost rent, which landlords may not have factored into their annual budget – and for those with a mortgage it will be particularly painful. 

Major ongoing costs to remember

Column	Average cost	How often
Cost of repairs/maintenance/service charge etc	£2,000	Every year
Buildings + contents insurance	£300	Every year
Cost of void periods (council tax + utilities)	£150	Every 2-3 years
Landlord rent protection insurance (optional)	£250	Once a year
Cost of furnishing (optional)	£5,000	Replace items as and when needed

Risk of unpaid rent: Potentially thousands  

Perhaps, just as important as any point raised so far is the risk factor.

As a landlord, there is always the risk of a situation where a tenant stops paying rent and refuses to leave.

There is also the risk of a tenant trashing the property, leaving expensive repair bills in their wake. 

It can take many months for landlords to get tenants out of their properties.

A tenant needs to be in at least three months of rental arrears for their four week notice to be served before a landlord has a mandatory ground to evict.

The average time for a case to go through the court system is currently around six months meaning it could take a total of ten months of not receiving rent and paying a mortgage and egal fees before a landlord finally gets the keys back.

How to find a new mortgage

Mortgage rates have jumped as conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.

If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible.  

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.

Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage