Simple UK Buy To Let Calculator

Buy To Let Calculator Explanation

This guide explains how a buy-to-let mortgage works, how lenders decide what they will lend you, how landlords are taxed in 2026, and how to read the results of the calculator above.

What is a buy-to-let mortgage?

A buy-to-let (BTL) mortgage is a loan specifically for property you intend to rent out rather than live in. Lenders treat it differently from a residential mortgage because the risk profile is different: you are relying on tenants and rental income to cover the payments, and the property may sit empty between tenancies.

Two features set BTL mortgages apart.

First, they are usually interest-only. You pay only the interest each month, and the original loan is repaid as a lump sum at the end of the term, typically by selling the property or refinancing.

This keeps monthly payments lower and is why our calculator models an interest-only payment by default.

Second, lenders generally want a larger deposit, commonly at least 25% of the property value, meaning a maximum loan-to-value (LTV) of around 75%. The best rates appear at 60% LTV and below.

The interest rate environment in 2026

Buy-to-let rates sit a little above residential rates because lenders price in the extra risk.

As of mid-2026, average fixed buy-to-let rates are in the region of 5.4% to 5.75%, though the sharpest deals (often with high arrangement fees) can be lower.

The Bank of England base rate, which heavily influences fixed pricing, has been on a gradual downward path but remains a long way from the ultra-low rates of a few years ago.

Because rates move constantly, the calculator lets you enter your own figure. If you have a mortgage offer or a broker quote, use that rate.

If you are just exploring, 5.5% is a sensible starting assumption for 2026.

The lender stress test: the number that decides what you can borrow

This is the part that catches most aspiring landlords by surprise.

A BTL lender does not simply lend you a percentage of the property value. Instead, it checks whether the rent comfortably covers the mortgage interest, with a safety buffer, even if interest rates were to rise.

This is known as the Interest Cover Ratio (ICR) stress test.

It works in two parts.

First, the lender ignores your actual rate and instead applies a higher stress rate, typically around 5.5% in 2026 (and sometimes lower for five-year fixed deals, where the rate is locked in).

Second, it requires your rent to exceed the interest at that stressed rate by a set margin, the ICR:

• 125% for basic-rate taxpayers and for people buying through a limited company
• 145% for higher-rate and additional-rate taxpayers buying in their personal name

So if your stressed annual interest is £10,000, a higher-rate landlord would need rental income of £14,500 a year to pass. The reason higher-rate taxpayers face a stricter test comes down to tax, which we will come to next.

The practical effect is that rent, not the property price, often dictates your maximum loan.

The calculator shows you the minimum rent the lender needs, whether your expected rent passes, and the maximum loan your rent can actually support.

If you fail, the usual levers are a bigger deposit, a five-year fixed deal with a lower stress rate, or buying through a company.

Section 24: why landlords are taxed on income, not profit

The single biggest change to landlord economics in recent years is Section 24 of the Finance Act 2015, fully in force since April 2020.

Before it, landlords could deduct their mortgage interest as a business expense before calculating tax.

Now, personal landlords cannot.

Instead, you are taxed on your full rental income (less non-interest costs such as letting fees, insurance and maintenance), and then receive a tax credit worth 20% of your mortgage interest.

For a basic-rate taxpayer this is broadly neutral, because the 20% credit matches the 20% tax rate.

For higher and additional-rate taxpayers it is a significant hit: they are effectively taxed at 40% or 45% on income that was largely paid out as mortgage interest, while only getting relief back at 20%.

In a high-interest environment this can push a property that looks profitable on paper into negative cashflow, which is exactly why the calculator can show a small monthly loss even when the rent appears healthy.

This is also why lenders apply the stricter 145% ICR to higher-rate borrowers: the tax system leaves them less surplus, so the lender wants a bigger rental cushion.

Should you buy through a limited company?

Because Section 24 hits personal higher-rate landlords so hard, many now buy through a limited company.

A company can still deduct mortgage interest in full before paying tax, and it pays corporation tax (19% on profits up to £50,000, rising to 25% above £250,000, with marginal relief in between) rather than income tax. Companies are also stress-tested at the gentler 125% ICR.

The trade-off is that company buy-to-let mortgages usually carry slightly higher rates and fees, there are accountancy costs, and extracting the profits (for example as dividends) creates a further tax charge.

As a rough rule of thumb, the company route tends to win once rental profits are substantial or you are a higher-rate taxpayer building a portfolio, while personal ownership can remain simpler and cheaper for a single lower-yielding property.

Select “Limited company” in the calculator to compare the two side by side. This is a decision worth taking proper advice on.

The stamp duty surcharge

Buying an additional residential property in England or Northern Ireland triggers a 5% stamp duty surcharge on top of the standard rates, applied to the whole purchase price across every band.

On a £250,000 property that adds up to a £15,000 tax bill before you have collected a penny of rent.

This is a major part of your upfront cost, so the calculator includes it when working out your total cash invested and your return. Scotland and Wales levy their own equivalent surcharges under different systems.

Yield, cashflow and return: three different things

It is easy to confuse these, but they answer different questions:

• Gross yield is annual rent divided by the property price. It is a quick comparison metric but ignores all costs.
• Net yield takes off running costs (but not the mortgage), giving a truer sense of the property’s income before financing.
• Monthly cashflow is what actually lands in your pocket after the mortgage interest, running costs and tax. This is the number that determines whether the property pays you each month or costs you.
• Return on cash invested (ROI) divides your annual net profit by the cash you had to put in (deposit plus stamp duty). It tells you how hard your money is working, and lets you compare property against other investments.

A property can have an attractive gross yield yet deliver thin or negative cashflow once a higher-rate tax bill and a 5.5% mortgage are accounted for. Always look past the headline yield to the cashflow and ROI.

Other rules worth knowing

Beyond the figures in the calculator, two regulatory areas are worth keeping on your radar.

Energy efficiency rules are tightening, with proposals that would require rental properties to meet a higher minimum EPC rating later this decade, which could mean upgrade costs.

And wider reforms to the rented sector continue to change the rules around tenancies and possession. Factor potential compliance spending into your longer-term sums.

How to use the calculator

Enter the property price, your deposit, the expected monthly rent and your annual running costs, then add your mortgage rate and choose your tax position.

The calculator will show your monthly payment and yields, tell you whether the deal passes the lender’s stress test and the maximum it would lend, and break down your annual income, tax and net profit, finishing with your return on the cash you have invested.

Adjust the inputs to see how a larger deposit, a different rent, or buying through a company changes the picture.

A final word

This calculator is designed to give you a realistic, rounded view of a buy-to-let investment under current rules, but it necessarily simplifies a complex area.

It does not account for void periods, capital growth, mortgage arrangement fees, your personal allowance, or the finer points of corporation tax.

Tax rules and lending criteria also change, sometimes at short notice.

Treat the output as a well-informed estimate to guide your thinking, and speak to a qualified mortgage broker and a tax adviser or accountant before committing to a purchase.

This article is for general information only and does not constitute financial, mortgage or tax advice.