Frequently Asked Questions
What is the ICR stress test for buy-to-let?Lenders test that rental income covers the mortgage interest by at least 125% (basic rate) or 145% (higher rate) at a stress rate (typically 5.5% or product rate +2%). Example: £1,000/month rent ÷ 145% = £689 max monthly interest.
Do I need a 25% deposit for a BTL mortgage?Most BTL lenders require a minimum 25% deposit (75% LTV). Some specialist lenders offer 80% LTV but with higher rates and stricter ICR requirements.
Can I get a BTL mortgage if I don't have a residential mortgage?Yes, though some lenders prefer you to own your main residence. Portfolio landlords (4+ BTL properties) face additional underwriting scrutiny under PRA rules.
What costs can I offset against BTL rental income?Mortgage interest (restricted to 20% basic rate credit since April 2020), agent fees, repairs and maintenance, insurance, professional fees, and letting costs. Capital expenditure cannot be deducted.
What is the Section 24 mortgage interest restriction?Since April 2020, buy-to-let landlords can no longer deduct mortgage interest from rental income. Instead, they receive a 20% basic rate tax credit. Higher rate taxpayers pay 40% tax on full rental income but receive only 20% relief — effectively paying 20% more tax.
Can I put a buy-to-let property in a limited company?Yes — many landlords use limited companies to avoid Section 24 restriction (companies deduct full interest). Corporation tax applies but the effective rate is often lower than personal income tax for higher earners. Seek tax advice before restructuring.
What is a portfolio landlord?Owning 4 or more mortgaged BTL properties makes you a 'portfolio landlord' under PRA rules. Lenders must assess the whole portfolio's performance, not just the individual property. Stress testing becomes more complex.
Can I let to family members?Some lenders prohibit regulated letting to family members. Rates and terms are typically better if you use an assured shorthold tenancy (AST). Regulated tenancies have more tenant protections and make it harder to sell.
How does stamp duty work on buy-to-let?BTL properties attract the standard SDLT rates PLUS a 3% surcharge on each band. From October 2024, the 3% surcharge increased to 5% for additional residential properties.
Is BTL mortgage interest tax deductible?Only as a 20% basic rate tax credit (not a deduction). If you pay 40% tax on your rental profits, you effectively get only half the tax relief compared to pre-2017. Sole trader landlords face full Section 24 restriction.
What is the difference between BTL repayment and interest-only?Interest-only: lower monthly payments but capital balance unchanged — you need a repayment strategy (sale, savings). Repayment: higher monthly payments but capital reduces each month. Most BTL mortgages are interest-only.
Can I use rental income from multiple properties for affordability?Lenders assess each property individually. Portfolio landlords must provide an overall portfolio spreadsheet. Negative rental coverage on one property can affect borrowing on another.