Is Buy-to-Let Still a Good Investment in 2025?

Despite increasing taxes and tighter regulations, the idea of owning a buy-to-let property remains popular especially among younger generations. According to a recent survey by Market Financial Solutions, about one in three Britons still hope to become landlords, with over half of those aged 18 to 34 expressing interest. This shows that, even in today’s fast-changing investment landscape, many people see value in property as a way to build wealth.

That said, the buy-to-let market has become more challenging. Since 2016, landlords have faced higher upfront costs like stamp duty surcharges and reduced mortgage interest relief. New laws, such as the upcoming Renters’ Rights Bill, will further limit landlords by capping rent increases and banning no-fault evictions. These changes have led many landlords to sell their properties, contributing to a shrinking supply of rental homes.

Still, buy-to-let remains attractive for those willing to take a longer view. In 2024, the average landlord made more than £100,000 in profit when selling, and rental yields recently hit their highest levels in over a decade at 7.11%. In parts of the Midlands and the North, where properties are more affordable and demand strong, investors are seeing particularly encouraging returns.

One way landlords are navigating the new landscape is by setting up limited companies. This structure offers important tax benefits, including the ability to offset all mortgage interest and pay lower corporation tax, making buy-to-let investments more efficient especially for higher-rate taxpayers. However, it does mean more administrative work and potentially higher mortgage fees.

Using mortgages to leverage investments continues to be a powerful strategy. Interest-only mortgages can help landlords cover monthly costs while benefiting from property appreciation over time. And with mortgage rates expected to fall, the market may become more inviting again. For investors who plan carefully and focus on areas with strong tenant demand, buy-to-let can still be a solid way to grow wealth.

In short, buy-to-let isn’t the easy win it once was but for those willing to adapt and manage the challenges, it remains a viable and rewarding investment option in 2025.