Is Being a Landlord Still Worth It in 2025? The Truth About Tax, Rules, and Rewards
- Jerelyn Aglibao
- Sep 5
- 6 min read
Updated: Sep 20
Property has long been seen as one of the safest investments in the UK. With the promise of steady rental income and long-term property price growth, many people are drawn to becoming landlords. But is it still worth being a Landlord in 2025?
The answer depends on your personal goals, how you structure ownership, and how you manage your obligations. Let’s break it down.
The Tax Implications: Personal Ownership vs. Limited Company
Personal Ownership
Here are the tax implications worth noting when considering buying a property personally.
Rental profits are taxed as part of your income. When you own rental property in your personal name, the profit you make from rent is treated just like any other income. That means it’s added on top of your salary, self-employment, or other income and taxed at your personal Income Tax rate. If you're a higher-rate taxpayer, this can significantly eat up your profits.
Mortgage interest relief is limited. You can only claim 20% of the mortgage interest as a tax-deductible expense, not the full amount.
Limited Company
Here are the key takeaways when you buy a property through a limited company:
Rental profits are taxed at the Corporation Tax Rate (currently between 19% & 25%), which is often lower than personal higher-rate tax.
Mortgage interest is fully deductible as a business expense.
Extracting profits (dividend or salary) creates another tax layer, but with good tax planning, this can be efficient.
Example: £15,000 Rental profit
Scenario 1: Personal Ownership
Rental profit before mortgage interest: £15,000
Mortgage interest paid: £5,000
You’ll be taxed on the full £15,000 at your personal tax rate.
If you’re a higher-rate taxpayer (40%):
Tax on £15,000 = £6,000
Mortgage interest credit = 20% of £5,000 = £1,000
Final tax = £5,000
Net income after tax = £15,000 – £5,000 = £10,000
Scenario 2: Limited Company Ownership
Rental profit before mortgage interest: £15,000
Mortgage interest paid: £5,000 (fully deductible)
Taxable profit = £10,000
Corporation Tax at 25%** = £2,500
➡️ Profit after tax left in the company = £7,500
If you leave it in the company, you can reinvest it without extra tax.
If you extract it as a dividend:
Say you’re a higher-rate taxpayer (33.75% dividend tax).
Tax on £7,500 = £2,531
Net dividend received = £4,969
** Note that 25% is the highest rate of corporation tax and unlikely to be paid by many Landlords. For more information on Corporation Tax, read our blog here.
So, if you’re building a property portfolio, a Limited Company structure usually makes more sense.
Capital Appreciation: The Long-Term Game
Property prices in the UK historically rise over time. If you bought a flat in Birmingham for £150,000 in 2015, it could now be worth £220,000+. That’s £70,000 gain before rental income is even considered.
Capital Gains Tax (CGT):
Personal ownership: When you sell, you may pay up to 24% CGT on gains after your allowance.
Limited company: The gain is taxed at Corporation Tax rates, which can be lower, but extracting funds has tax implications.
So, while property can grow your wealth, planning your exit strategy is just as important as entering the market.
Landlord Obligations and Regulations
Being a Landlord is not just about collecting rent. You must follow rules that protect tenants and keep properties safe. These include:
Energy Performance Certificate (EPC)
Before you can rent out a property in the UK, you must have a valid EPC. This document shows how energy-efficient the property is, rated from A (most efficient) to G (least efficient). At present, all rental properties must have a minimum rating of E to be legally let. Failure to provide a valid EPC can result in fines of up to £5,000.
Read more about EPC requirements here.
Gas & Electrical Safety Checks
Landlords are legally required to ensure that both gas and electrical installations are safe for tenants. A Gas Safety Certificate (CP12) must be obtained every 12 months by a Gas Safe registered engineer, and tenants must receive a copy of the certificate before moving in and within 28 days of each annual check. Similarly, an Electrical Installation Condition Report (EICR) must be carried out every 5 years by a qualified electrician. If the report identifies urgent remedial work, landlords must complete it within 28 days (or sooner if required). Tenants should always be provided with a copy of the report. Read more about Gas & Electrical Safety requirements here.
Tenancy Deposit Protection (TDP)
If you take a deposit from tenants, you must protect it in a government-approved Tenancy Deposit Protection (TDP) scheme within 30 days of receiving it. There are three approved schemes you can choose from: the Deposit Protection Service (DPS), MyDeposits, or the Tenancy Deposit Scheme (TDS). Once the deposit is protected, you also need to give the tenant “prescribed information” about where and how their deposit is held. Failure to comply can result in a fine of up to three times the deposit amount and may also prevent you from serving a Section 21 eviction notice.
Read more about Tenancy Deposit Protection here.
Right-to-Rent Checks
Landlords must also check that tenants have the legal right to rent in England. This means carrying out Right-to-Rent checks before the tenancy starts, which involve verifying documents such as passports, visas, or proof of immigration status. You must make copies of these documents and keep them securely for your records. If you fail to carry out these checks properly, you could face fines of up to £3,000 per tenant, and in serious cases, even criminal penalties.
Read more about Right-to-Rent Checks here.
Licensing (HMO/Selective)
Depending on your property type and location, you may also need to obtain a landlord license. If you rent to five or more people from two or more households who share facilities, your property will be classed as a House in Multiple Occupation (HMO) and will usually require an HMO license. These licenses last up to five years and must be renewed before they expire. They also come with conditions, such as minimum room sizes, fire safety standards, and waste disposal requirements. In some areas, local councils also operate Selective Licensing, which means that all landlords in designated zones must hold a license, even if the property isn’t an HMO. Because rules can differ from one council to another, it’s essential to check with your local authority. Read more about Licensing here.
Incentives for Landlords in 2025
1. Private Rented Sector Housing Guarantee Scheme (PRSGS)
The UK government offers a loan guarantee scheme designed to support development or conversion of housing for private rent. Read more here.
2. Local Authority Incentive Payments to Let to Homeless Households
Many local councils in England offer one-off cash incentives to private landlords to take homeless families or those threatened with homelessness. Here's a government-linked and council example: West Northamptonshire Council, Tunbridge Wells Borough Council, Peterborough Council
3. Energy Efficiency Grants and Schemes
The UK government (and devolved administrations) offer several grants and schemes that landlords can tap into — especially to improve EPC ratings and lower carbon emissions. An example is the UK government grant scheme in England & Wales that gives property owners up to £7,500 off the cost of installing a low-carbon heating system, such as a heat pump. Know more here and apply here.
Is It Still Worth It?
It can be – but only if you:
✅ Understand your tax position (personal vs. company).
✅ Plan for long-term growth, not just short-term cash flow.
✅ Keep up with regulations and treat it like a business.
For some, the passive income and property growth are worth the effort. For others, the rules, tax, and admin make it less attractive.
CONCLUSION
Being a landlord in the UK can still be profitable, but it’s no longer the “easy money” it was once perceived to be. Smart tax planning and professional advice are key to making it work for you.
At Duo Accountants, we help landlords structure their property investments in the most tax-efficient way – so you keep more of what you earn.
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