A buy to let (BTL) mortgage is a loan specifically designed for purchasing or remortgaging a property you intend to rent out rather than live in. Unlike a residential mortgage, buy to let lending is assessed primarily on projected rental income rather than personal salary — though income requirements still apply for many lenders.

The buy to let market in 2026 has stabilised after a period of significant change. Average two-year fixed BTL rates stand at 4.70% and five-year fixed rates at 5.09% as of early 2026, according to Moneyfacts data — lower than their 2023 peaks but significantly above pre-2022 levels.

Source: Moneyfacts buy to let mortgage data, February 2026. Rates change frequently — always verify current rates with a mortgage broker or directly with lenders before making any decision.

Buy to Let Mortgage Key Facts 2026

How Rental Income is Assessed — The Interest Coverage Ratio

Lenders require projected rental income to cover the mortgage interest by a set multiple — known as the interest coverage ratio (ICR). The standard requirement is:

Basic rate taxpayers: rental income must be at least 125% of monthly interest at the lender's stress rate

Higher rate taxpayers: rental income must be at least 145% of monthly interest at the lender's stress rate

The stress rate used for the calculation is typically 5.5-7% regardless of the actual mortgage rate — this ensures you can still afford the mortgage if rates rise.

Buy to Let Tax Rules 2026

Stamp Duty Land Tax (SDLT): Buyers of additional properties in England pay a 5% surcharge on top of standard residential SDLT rates. On a £200,000 BTL property, this adds approximately £10,000 to acquisition costs. Always use an SDLT calculator or solicitor to calculate the exact amount.

Section 24 mortgage interest relief: Since April 2020, landlords who are higher or additional rate taxpayers can no longer deduct their full mortgage interest from rental income before calculating tax. Instead, they receive a 20% tax credit on mortgage interest. This significantly reduced the profitability of leveraged buy to let for higher-rate taxpayers and drove many to incorporate as limited companies.

Limited company BTL: Many landlords now purchase through a limited company (SPV — Special Purpose Vehicle) to retain the ability to offset mortgage interest as a business cost. Corporation tax rates and dividend rules apply. Always seek specialist tax advice before choosing between personal and limited company ownership.

Capital Gains Tax (CGT): When you sell a BTL property, you pay CGT on the gain above your annual CGT allowance. Current rates for residential property gains are 18% (basic rate taxpayer) and 24% (higher rate). Verify current rates at gov.uk/capital-gains-tax.

The Renters Rights Act 2026

The Renters' Rights Act is due to come into effect from 1 May 2026 in England. Key changes for landlords include: abolition of Section 21 (no-fault eviction), all tenancies become periodic (no fixed-term ASTs), rent increases limited to once per year via Section 13 process, and strengthened tenant rights around pet ownership and property standards.

These changes significantly affect eviction processes and tenancy management. Landlords should seek legal advice to understand the implications for their existing and new tenancies.

This article is for informational purposes only and does not constitute financial advice. Mortgage products change frequently — always seek independent FCA-authorised mortgage advice before making any decision. Your home may be repossessed if you do not keep up repayments on your mortgage.