Date Published 19 October 2026
A property might achieve an excellent rent and still turn out to be a disappointing investment.
Why?
Because the rent is only one side of the calculation.
Stamp duty, mortgage interest, insurance, maintenance, tax and compliance costs can make a substantial difference to the amount a landlord actually keeps.
Before purchasing a buy-to-let in Poole, it is important to look beyond the advertised yield and work out the complete cost.
Stamp Duty Land Tax on a buy-to-let
If purchasing an additional residential property in England during 2026, the higher Stamp Duty Land Tax rates will normally apply.
The current rates are:
- 5% on the portion up to £125,000.
- 7% on the portion from £125,001 to £250,000.
- 10% on the portion from £250,001 to £925,000.
- 15% on the portion from £925,001 to £1.5 million.
- 17% on the portion above £1.5 million.
These are progressive bands, so you only pay each rate on the part of the price falling within that band.
For example, the SDLT on a £300,000 additional property would normally be:
- £6,250 on the first £125,000.
- £8,750 on the next £125,000.
- £5,000 on the remaining £50,000.
That produces a total bill of £20,000.
A further 2% surcharge may apply to certain non-UK resident purchasers. GOV.UK
Stamp duty must be included in your original investment calculation. It is not a small incidental expense that can be dealt with later.
Remember the other buying costs
Landlords should also budget for:
- Solicitors' fees.
- Mortgage and valuation fees.
- A survey.
- Refurbishment.
- Electrical or gas work.
- Initial safety checks.
- Furnishings and appliances.
- Leasehold enquiries.
- Licensing where applicable.
- A contingency fund.
A property advertised at £250,000 may cost considerably more than £250,000 before it is ready for its first tenant.
Buying personally or through a limited company
There is no single correct structure for every landlord.
Buying personally can be simpler and may suit somebody purchasing one property with a modest mortgage.
A company structure may be worth considering for somebody building a portfolio or intending to retain profits within the business.
However, a company also brings additional accounting, mortgage, legal and administrative considerations.
The decision should be made before buying because transferring a property into a company later can potentially trigger tax, stamp duty and mortgage consequences.
Tax when the property is owned personally
An individual landlord pays Income Tax on the taxable profit from their property business.
Allowable day-to-day expenses can include:
- Letting-agent fees.
- Accountancy fees.
- Buildings and contents insurance.
- Repairs and maintenance—but not improvements.
- Ground rent and service charges.
- Utilities and council tax paid by the landlord.
- Cleaning, gardening and other direct letting costs.
Mortgage finance costs for individual residential landlords are generally dealt with through a basic-rate tax reduction rather than being deducted fully from rental income. GOV.UK
From April 2027, separate Income Tax rates for property income are due to become:
- 22% basic rate.
- 42% higher rate.
- 47% additional rate. GOV.UK
This makes forward planning particularly important for personally owned properties.
Tax when a company owns the property
A limited company pays Corporation Tax on its taxable profits.
The small-profits rate is currently 19% for profits of £50,000 or less, while the main rate is 25% for profits above £250,000. Marginal Relief may apply between those figures.
Those thresholds can be reduced where the business has associated companies. GOV.UK
A company can generally claim interest on property loans as an allowable business expense.
However, that doesn't automatically make company ownership cheaper.
If the owners take profits from the company as dividends, personal Dividend Tax may also become payable.
For 2026/27, the dividend rates above the available allowance are:
- 10.75% at the ordinary rate.
- 35.75% at the upper rate.
- 39.35% at the additional rate. GOV.UK
Company mortgages may also carry different interest rates and fees.
This is why 'companies can deduct mortgage interest' is not enough information on which to base a decision.
Making Tax Digital for landlords
Making Tax Digital for Income Tax began applying from 6 April 2026 to qualifying sole traders and landlords whose combined gross self-employment and property income exceeded £50,000 on their 2024/25 tax return.
The threshold reduces to:
- More than £30,000 from April 2027.
- More than £20,000 from April 2028.
Qualifying income is measured before expenses.
Those affected must use compatible software, keep digital records and send quarterly summaries of property income and expenses. GOV.UK
Landlords should check their position with their accountant rather than waiting for the first deadline to arrive.
Calculate the net return
Before buying, include:
1. Purchase price.
2. Stamp duty and acquisition costs.
3. Refurbishment.
4. Mortgage costs.
5. Insurance.
6. Agent fees.
7. Service charges and ground rent.
8. Routine and major maintenance.
9. Safety and compliance costs.
10. A realistic allowance for empty periods and arrears.
11. The likely tax position.
The investment needs to work after these costs—not simply before them.
Get advice from the right people
A letting agent can advise on the achievable rent, tenant demand and practical suitability of a property.
An accountant or specialist tax adviser should advise on ownership structure and taxation.
A mortgage adviser can compare finance options.
At Lewis Dean, we are always happy to assess a potential purchase from the letting and management side.
We won't pretend to be your accountant, but we can help you avoid building an expensive tax plan around a rental figure the property was never likely to achieve.
