Becoming a landlord: Costs of becoming a landlord

Investment costs

Becoming a landlord starts with buying a rental property.  

Investment costs vary depending on factors such as property type, legal and professional fees, and the potential need for upgrades and repairs.

Prospective landlords have various options when seeking investment funds. These can include mortgages, personal savings, and investment partnerships.  

For more information, read our guide on how to become a landlord. 

Taxes

When buying a property to be rented out, you may need to pay Stamp Duty Land Tax (SDLT) (external link).  

You pay SDLT on increasing portions of the property price.  

From 1 April 2025, the rates are as follows*:  

• 0% on the first £125,000
• 2% on the portion from £125,001 to £250,000
• 5% on the portion from £250,001 to £925,000
• 10% from £925,001 to £1.5 million
• 12% on any amount above £1.5 million.¹ (external link)

*These rates can differ for first-time buyers.

You’ll typically pay an additional 5% if you already own another property.

You can use GOV.UK’s SDLT calculator (external link) to work out how much you’ll owe.

You may also have to pay tax on the money you earn from renting out your property.

Rental income must be reported to His Majesty’s Revenue & Customs (HMRC) as part of your Self Assessment tax return (external link).  

How much you pay may vary depending on:  

• Your personal circumstances (including income from your job, investments, and other sources)
• How much profit you make from renting.

However, you can claim certain costs as ‘allowable expenses’ to reduce tax.  

Learn what might count as an allowable expense in our landlords’ guide to taxes.

Most landlords do not need to pay National Insurance Contributions (NICs) on their rental income. That’s because the money you earn from rent is typically considered investment income rather than earned income.  

However, to qualify for the State Pension and certain benefits, you may need to pay voluntary National Insurance contributions.  

There are two main types of National Insurance contributions:  

• If being a landlord is your main job, you might pay Class 2 contributions (external link)
• If being a landlord is not your main job, you might pay Class 3 contributions (external link).

You may also have to pay Capital Gains Tax (CGT) if you make a profit when selling a property that’s not your home.  

You pay tax on the profit you gain, which is typically calculated by working out the difference between the amount you originally paid for the property and how much you sold it for.

In most cases, you must report and pay your Capital Gains Tax (external link) on property sales within 60 days. 

Letting agency fees

Letting agency fees are charges to landlords for various property management services, such as advertising, conducting inspections, and handling legal and admin tasks.  

Letting agents can help manage rental properties by showing prospective tenants around, filling in paperwork, and collecting rent. Some agents help with the initial stages until the tenancy agreement is signed, while others offer a full management service.  

Before 2019, tenants in the UK typically paid these fees. However, the Tenant Fees Act 2019 (external link) bans most letting agency fees for tenants.² (external link)  

The are various types of letting agency fees, including:  

• Tenant find – one-off fee for finding and setting up new tenants.  
• Setup – one-off charge when you sign up with an agent, covering admin and marketing preparation.
• Inventory – covers check-in and check-out reports of your property’s condition.
• Rent collection – the agent collects rent and chases arrears, handling finances but not managing property maintenance.
• Emergency call-out – for handling urgent issues outside office hours.
• Renewal – covers negotiating terms and updating agreements when an existing tenant signs a new contract.
• Full management – a monthly fee for complete management of your property, handling everything from rent collection to repairs, inspections, and tenant issues.

Letting agencies charge percentage-based fees, fixed fees, and combined fees.  

Percentage-based fees

Many agents charge a percentage of either the monthly or annual rent.  

One-off services, like finding tenants, are often a percentage of the annual rent.

Ongoing services, like property management, are typically a percentage of the monthly rent.  

For example, if your property rents for £1,000 per month (£12,000 per year):

• A 6% tenant-find fee would be a one-off payment of £720.
• A 10% full management fee would cost £100 per month.

Fixed fees

Fixed fees are typically charged for specific tasks like:  

• Inventory check-in and check-out reports
• Marketing fees
• Property inspections.

For example, you might be charged a one-off check-in inspection fee of £75.

Combined fees

Many agents use both percentage and fixed fees.  

For example, they might charge:  

• 10% monthly management fees
• Plus £50 for property inspection. 

Repairs

Landlords are legally obligated to ensure their rental properties are safe, habitable, and meet basic living standards.  

These rules are outlined in various legislations, including the Landlord and Tenant Act 1985, Section 11 (external link), the Housing Act 2004 (external link), and the Homes (Fitness for Human Habitation) Act 2018 (external link).  

Landlords must make repairs in ‘reasonable’ time.

Budgeting for initial and ongoing repairs and maintenance can help ensure financial stability while maintaining property value and tenant satisfaction.

These rules may vary in Scotland (external link) and Northern Ireland. (external link)  

Insurance

Landlords insurance costs can vary depending on your circumstances.  

Assessing factors such as your property type, age, and location can help you estimate your landlords insurance premium. 

Your property type

One of the main factors determining your landlords insurance premium is your building sum insured (BSI), which is the amount it would cost to completely rebuild your property. A higher BSI can mean a higher premium.  

So, large detached houses can be more costly to insure in some instances, while flats in purpose-built blocks can have cheaper premiums. 

Your property age

Your property’s age could influence your premium. For example, newer builds can be less expensive to insure because older buildings may be susceptible to problems like subsidence and damp.

Your property location

Your property location might also vary based on local risks.  

For example, areas that are flood-prone or prone to subsidence can have higher premiums.

Your optional extras

Add-ons like contents insurance, legal protection cover, and employers’ liability insurance can cost more because they offer broader protection. Typically, the more extras you add, the higher your premium will be.  

The cost of extras also varies depending on your circumstances.  

For example:  

Contents insurance can cost more if your rental property contains high-value items like electronics or furniture.  

Employers’ liability cover might be costlier if you have several employees in higher-risk roles, such as construction workers, roofers, or groundskeepers.

Mandatory certifications

Landlords are legally required to have various certificates, including Energy Performance Certificate, Electrical Safety Certificate, and Gas Safety Certificate.  

Energy Performance Certificates (EPCs) rate a property’s energy efficiency from A (very efficient) to G (very inefficient). Landlords must provide an EPC when letting out a property. To get a new energy certificate, you need an assessment.  

Assessment costs vary depending on factors such as property size.  

Visit GOV.UK to find a qualified energy performance assessor (external link).

Electrical Inspection Condition Reports (EICRs), or electrical safety checks, are detailed reports that show the condition of a property’s electrical installations and can identify any issues that need fixing.  

Landlords must get an EICR from a qualified electrician at least every five years or upon a change of tenancy.  

Electrical safety checks can cost between £100 and £250.  

Gas safety checks must be performed annually by a Gas Safe registered engineer. (external link) Tenants should receive a copy of this certificate within 28 days of the inspection.  

Gas equipment (such as gas stoves and boilers) must also be installed and maintained by a Gas Safe registered engineer.

Safety

Landlords must ensure that their properties comply with safety standards.  

Adhering to certain safety responsibilities (external link) helps maintain a hazard-free environment for tenants.  

The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022 (external link) state that:  

• Smoke alarms must be installed on each floor that has a room for living accommodation
• Carbon monoxide detectors must be installed in any room containing a solid fuel-burning appliance (such as coal fires or wood-burning stoves).

If the property is a house in multiple occupation (HMO) (external link), fire alarms and extinguishers are required^.3 (external link)