Is property still a good investment?

Property can still be a good investment, but it is no longer the straightforward route to wealth it once appeared to be. If you are buying a rental property today, you are doing so in a market shaped by higher borrowing costs, tighter tax rules, larger upfront taxes and stronger tenant protections. Since 1 May 2026, section 21 no fault evictions have been removed for existing and new tenancies in England, meaning landlords now need a legal ground for possession under the Renters’ Rights Act framework.

That does not mean buy to let is finished as rental demand still remains strong in many areas, and property can still provide income and long term capital growth. The question is whether the return you keep after tax, costs, borrowing and risk is enough when compared with alternatives such as ISAs, pensions and diversified investment portfolios.

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Is property still a good investment in 2026/7?

For some investors, yes. For many others, only with careful planning. The key difference today is that the headline rent is not the same as the real return. A gross rental yield may look attractive, but mortgage interest, tax, maintenance, insurance, letting costs, void periods and future capital gains tax can reduce what you actually keep.

The Bank of England Base Rate is currently 3.75%, and higher financing costs have changed the sums for landlords who rely on borrowing. At the same time, the Renters’ Rights Act has changed how landlords recover possession, while tax changes have reduced the benefit of using debt to invest. Property can still work, but even accidental landlords now need to treat it as a business and compared against other investments on an after tax basis.

Upfront costs you can’t ignore

The first challenge with property is that you need significant capital before you receive a penny of rent. Unlike an ISA or pension, where you can usually invest gradually, buy to let requires a large initial commitment. That money is tied to one asset, in one location, with high costs to buy and sell.

Deposit

Buy to let lenders usually require a larger deposit than residential mortgage lenders. A typical landlord may need at least 25% of the property value, and sometimes more depending on the expected rent, personal income and lender stress testing. A bigger deposit can improve cash flow, but it also means more of your money is concentrated in one investment.

Fees

You also need to allow for mortgage arrangement fees, valuation fees, legal fees, survey costs and letting agent costs. These can materially reduce the return in the first few years. If you are comparing property with a stocks and shares ISA or pension, it is important to include these setup costs rather than focusing only on the monthly rent.

Refurbishment

Many rental properties need work before they are let. That may be cosmetic, such as flooring and decoration, or more substantial, such as kitchens, bathrooms, heating systems and energy efficiency improvements. A property that looks profitable on paper can become far less attractive if it needs months of work before it generates income.

Ongoing costs

The running costs of buy to let are easy to underestimate. Maintenance is not optional. Boilers fail, roofs leak, appliances break and regulations change. A sensible landlord keeps cash aside for repairs rather than assuming every month of rent is profit.
Voids – or periods of time when the property is empty - also matter. Even in areas with high demand, there may be periods between tenants, or delays while work is completed. During that time, you may still have a mortgage, insurance, service charges, council tax and utilities to pay.

Insurance is another cost that needs to be factored in. Standard home insurance is not enough for a let property, so you will usually need specialist landlord insurance. Depending on the property, you may also need buildings cover, contents cover, rent guarantee protection and public liability cover.

How are rental profits taxed

If you own a rental property personally, rental profit is added to your other income and taxed through income tax. The major change many landlords already face is that mortgage interest can no longer be deducted in full before calculating taxable profit. Instead, unincorporated residential landlords receive finance cost relief as a tax credit.

A further change is also on the way. Following the Autumn Budget 2025, the government confirmed that separate tax rates for property income will apply from April 2027. From the 2027/28 tax year, property income will be taxed at 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers. Residential finance cost relief will also be calculated at the new property basic rate of 22%

This means landlords will face a higher tax charge on rental income from April 2027, particularly where profits are already being squeezed by higher mortgage costs, maintenance and other running expenses.

This can create a painful result for higher rate and additional rate taxpayers. You may pay tax on a profit figure that feels much higher than the cash profit you actually receive. For this reason, some landlords consider using a limited company, but that brings corporation tax, accountancy costs, mortgage differences and possible tax charges if transferring existing property. It needs personalised advice.

Capital Gains Tax when you sell

If the property rises in value and is not your main home, capital gains tax may be due when you sell. For 2026/27, the annual exempt amount for individuals is £3,000. Residential property gains are generally taxed at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. 

It is worth noting though that it is gains falling in the basic rate income tax band that are taxed at 18%. The balance is taxed at 24% (i.e. a 'basic rate income tax' payer won't necessarily pay 18% on all gains). 

This is where property can look different from ISAs and pensions. A gain inside an ISA is free from capital gains tax. A pension can also grow largely free of capital gains tax and income tax within the pension wrapper. With property, tax can arise on the income each year and again on disposal.

Stamp Duty Land Tax: what the Autumn Budget changed

Stamp Duty Land Tax (SDLT) is one of the biggest upfront barriers for buy to let investors in England and Northern Ireland. From 31 October 2024, the higher rates for additional dwellings increased from 3% to 5% above standard residential SDLT rates. This applies where buying the property means you will own more than one residential property.

Buy-to-Let Stamp Duty Rates (effective from 1 April 2025):

Up to £125,000	5%
£125,001 – £250,000	7%
£250,001 – £925,000	10%
£925,001 – £1.5 million	15%
Above £1.5 million	17%

The above rates are chargeable on each portion of the property value e.g. the first £125,000 at 5%, next £125,000 at 7%, etc.

This change makes the first day of ownership more expensive. A landlord now starts further behind before rent, growth or tax planning can improve the position. When you compare property with investing through an ISA or pension, the SDLT cost should be treated as part of the investment hurdle.

Property vs ISAs & Pensions

Property has strengths. It can provide rental income, may rise in value and can be improved through active management. It can also be financed with a mortgage, which may magnify gains if values rise. The same leverage can magnify losses if prices fall or costs rise.

ISAs and pensions are usually more flexible from a tax planning perspective. The ISA allowance is currently £20,000 per tax year (although the cash element is dropping to £12,000 a year for the under 65s from 2027), and income and gains within an ISA are tax free. Pensions can offer tax relief on contributions, with the standard annual allowance at £60,000 for 2026/27 for most people, although this can be reduced for some higher earners or those who have already accessed pensions flexibly. 

The trade-off is control and access. Property feels tangible, but it is illiquid. ISAs can usually be accessed more easily. Pensions are designed for retirement and have access restrictions, but they can be highly effective for long term wealth planning.

For ISAs and Pensions, it is important to note that past performance is not a guide to future returns, and investment returns are not guaranteed; you may get back less than you originally invested. There may also be costs involved in setting up and managing your investments 

Estate planning and property: inheritance considerations

Property can create inheritance tax issues because it often increases the value of your estate while producing income that is taxed during your lifetime. The standard inheritance tax nil rate band is £325,000, and the residence nil rate band can add up to £175,000 when passing down you main residence to direct descendants, subject to the rules and tapering for larger estates. Buy to let property will not usually qualify for the residence nil rate band in the same way as your main home unless it has been lived in at some point as a main residence (but you can only choose one property to use against though, if more than one in estate). 

This matters because a property portfolio may be valuable but illiquid. Your beneficiaries could inherit an inheritance tax liability without enough cash in the estate to pay it. They may need to sell property quickly, possibly at a poor time in the market. Lifetime gifting, trusts, insurance and pension planning may all be relevant, but each has its own rules and tax consequences.

Speak to an investment expert

Property can still have a place in your financial plan, but it should not be judged by rent alone. You need to compare it with the net return you might receive from ISAs, pensions and other investments, while also considering tax, access, diversification and inheritance planning.

A financial adviser can help you look beyond the property headline and decide whether buy to let fits your wider goals. The right answer may be to buy, hold, sell, restructure or invest elsewhere. What matters is that you make the decision with clear numbers, current tax rules and a plan for how the asset will support you and your family over time.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The information is based upon our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The value of investments can go down as well as up, you may not get back what you originally invested. The FCA does not regulate tax, estate or cash flow planning.