Is Buy to Let worth it in 2026?

What’s going on in the rental market?

After years of rollercoaster demand and spiralling rents, the rental market is showing signs of calming down. Long gone are the days when letting agents were drowning in enquiries. In fact, rental demand is the weakest it's been for 5 years, and 24% lower than a year ago. This is being caused by falling migration levels and improved mortgage availability for first-time buyers.

At the same time, more homes are coming onto the rental market. The number of available homes to rent has jumped by almost 20% compared to a year ago, and the average agent now has 19 properties on their books (up from just 14 in 2022).

With more choice and less frenzied demand, homes are taking a bit longer to let – 16 days on average, compared to just 12 days in 2023.

Rents themselves are still rising, but much more gently. The average rent in the UK stands at £1,300, up just 2.4% year-on-year – the slowest rate of growth for four years. In some places, like Bristol and Leeds, rents have even dipped slightly. So, while rental yields remain healthy (averaging 6% UK-wide and topping 7.5% in hot spots like the North East and Scotland), landlords need to be realistic about current market conditions, instead of expecting a market similar to what we saw a few years ago.

Pros of Buy to Let in 2026

Despite tighter rules and a cooling market, Buy to Let still has its perks. Here’s what keeps landlords in the game:

1. A regular source of income

Even with slower rental growth, the right property can still offer a stable monthly income and help pad out your savings (or your retirement pot).

After all, UK rents are up 36% since 2020. With rental yields now averaging around 6% nationally, and some regions offering even more. So you can still see your money work harder than a traditional savings account with a Buy to Let.

1. Capital growth potential

House prices aren’t shooting up like they did during the pandemic, but they’re still forecast to rise modestly in 2026 – around 1-5% as the market settles. That steady growth means you could sell your investment property for more than you paid, even if the double-digit booms are behind us.

1. High demand for rental properties (still!)

While demand for rentals isn’t as feverish as it was, plenty of people are still renting, especially as buying remains unaffordable for many. Even with the slowdown,demand is still above pre-pandemic levels, and yields have held up – especially outside of London, where entry costs are less eye-watering.

Cons of Buy to Let in 2026

Of course, it’s not all sunshine and rainbows. There are some real challenges facing landlords in the current climate.

1. Higher mortgage rates

Mortgage rates may be heading down (slowly), but they’re still higher than in the rock-bottom days of just a few years ago. Predictions are for between 3-3.5% in 2026, but it's never a guarantee. Higher rates mean bigger monthly repayments and can squeeze your profit margins.

1. Increased tax burden

Landlords have felt the sting of higher taxes in recent years:

• Higher Stamp Duty: There’s still a 3% stamp duty surcharge on Buy to Let properties in England and Northern Ireland, which makes getting onto the ladder more expensive.
• Mortgage interest tax relief: The days of offsetting your mortgage interest against rental income are over. Now it’s a 20% tax credit instead, which hits higher-rate taxpayers particularly hard.
• Capital Gains Tax: The tax-free allowance on property gains is down to £3,000, so expect a bigger tax bill when you sell.

1. Affordability is a real constraint

Rents have increased much faster than incomes – up £4,100 per year on average over the last five years – making renting less affordable for many. Nearly a third of private renters now rely on housing benefit to get by, and affordability is actively capping further rent rises. So, when crunching the numbers, remember: there’s a ceiling to how much tenants can, and will, pay.

1. Shifting legislation

The upcoming Renters (Reform) Bill will shake up the rules for landlords:

• 'No-Fault' evictions are going: Say goodbye to Section 21. This means more tenant security, but could make it tougher to regain possession.
• No more fixed-term tenancies: Expect more rolling tenancies, which means less predictability for landlords in terms of end dates.
• Plus, all the usual health and safety responsibilities still apply.

1. Energy efficiency standards

The government wants all rental homes to hit a minimum EPC rating of 'C' by 2028. That’s great for bills and the environment, but not so great for your wallet if the property needs work. Fines for non-compliance can be hefty (up to £30,000!), so it pays to plan ahead.

Is a Limited Company the right move?

With tougher tax relief rules, more landlords are setting up limited companies for their Buy to Let investments. This can mean lower corporation tax rates (currently 25%) and allows you to deduct mortgage interest as a business expense. But – and it’s a big but – it comes with extra admin and your pool of mortgage deals may be smaller or slightly pricier. Tax advice is a must before going down this route.

Are Buy to Lets still profitable?

It all comes down to the maths. The big number to check is your rental yield:

Rental Yield = (Annual Rental Income / Property Value) x 100

Let’s say you buy at £250,000 and rent for £1,200 a month (£14,400 a year):

£14,400 / £250,000 x 100 = 5.76%

Average yields are 6% nationally and even higher in regions like the North East and Scotland. A “good” yield? 5-8% is the sweet spot. Just remember to budget for costs such as mortgage repayments, repairs, insurance, and letting agent fees. With rental growth slowing, it's no longer realistic to bank on massive yearly increases.

The bottom line

Buy to Let can still be a smart investment in 2026, but it’s hardly a set-and-forget way to riches. The market’s returning to normality: rental inflation has eased, more homes are available, and yields are better for those willing to hunt outside big cities. But tougher rental affordability for tenants, higher taxes, stricter rules, and unpredictable costs mean you need to go in with eyes wide open.

A final gut-check before you take the plunge:

• Will your rent cover the mortgage, taxes, and those sneaky repairs?
• Can you weather a void period or two?
• Do you know your legal and maintenance responsibilities?
• Would a limited company structure save you money (after tax advice)?
• Or would your cash do better elsewhere?

If you’re up for a bit of research and careful budgeting, Buy to Let’s still in the running.