Buy-to-let looks simple on paper — buy a property, let it, collect rent — but it is the deal type most reshaped by tax policy over the last decade. If you understand three things — how Stamp Duty is loaded at purchase, how Section 24 quietly raises your bill each year, and how Capital Gains Tax lands when you sell — you understand roughly 90% of what actually moves your returns.
At purchase: SDLT and the 3% surcharge
On our worked £250,000 terraced house, a higher-rate landlord pays around £10,000 in Stamp Duty. That is not because the property is expensive — it is because the 3% additional-property surcharge is applied across every band once you already own another home. First-time-buyer relief does not apply to an investment purchase, so the surcharge is effectively an entry cost you must earn back before the deal is genuinely in profit.
While you hold it: the Section 24 trap
This is where most landlords lose money without noticing. In the worked example the mortgage interest is £10,313 a year, but under Section 24 you can no longer deduct it as a cost. Instead you are taxed on the profit *before* interest, then handed a 20% credit back. For a 40% taxpayer that gap turns a roughly £835 tax bill under the old rules into nearly £2,897 today — enough to tip a modestly geared BTL into negative cashflow.
Why investors move to a company
Because Section 24 only bites on personally-held property, many landlords now buy through a limited company where interest stays fully deductible. It is not automatically better — you pay tax again to take the money out — but it is the single biggest reason the ownership question matters. This is the same interest-deductibility advantage that makes companies attractive for commercial property, where Section 24 never applied in the first place.
When you sell: Capital Gains Tax
CGT is charged on the gain above your annual exempt amount at residential rates (currently 18% / 24%), and UK residential disposals must be reported and paid within 60 days of completion. If you improved the property, those capital costs are added to your base cost and reduce the gain — which is exactly the mechanism that makes a BRR/BRRR refurbishment tax-efficient on exit.
Where buy-to-let sits against other strategies
If you are weighing BTL against higher-yield plays, it helps to see the tax contrast directly. An HMO carries the same Section 24 hit but adds licensing and possible Business Rates. Serviced accommodation can escape Section 24 if it qualifies as a furnished holiday let — but risks VAT registration. And a flip leaves CGT behind entirely, because HMRC taxes it as trading income.