In 2019, a colleague told me he’d done well for himself. Two buy-to-let properties in the north of England, both mortgaged, both rented, managed by an agent. He’d been at it for six years. Capital appreciation had been reasonable. The rent was covering the mortgage. He was relaxed about it.
Three years later, same man, different energy. Section 24 had fully phased in. His accountant sent a tax bill nearly double what he expected. One tenant left and the flat sat empty for two months while the mortgage kept going out. Then a boiler broke — £2,600 for a replacement, wiping out most of a year’s net profit.
He wasn’t losing money. But he was working — admin, calls, decisions, stress — for a net yield that, when we finally calculated it properly, came to around 2.4%. The same capital in a global index fund had returned over 8% annually in the same period. Zero administration. No tenant calls. No Section 24.
He’s still a landlord. But he wishes someone had run the real numbers with him before he bought.
This post is that conversation.
The Emotional Case for Bricks and Mortar
Buy-to-let is the default investment choice for UK doctors. Not because it’s always the best option — it often isn’t — but because it feels right in a way that index funds don’t.
Property is tangible. You can drive past it. The concept is immediately comprehensible: buy a flat, rent it out, the tenant covers the mortgage, the property rises in value, and in twenty years you own an asset outright. That story is clean, consistent with how most of us watched our parents build wealth, and deeply embedded in the culture of medicine.
Then there’s leverage. You put in 25% of the purchase price and control 100% of the asset. If the property rises 10%, you’ve made roughly 40% on your equity. That multiplier is real and, in a rising market, genuinely powerful.
These instincts aren’t wrong. Property has appreciated significantly over time. Buy-to-let has made money for a lot of people.
But the game changed in April 2017. And most doctors — who can quote drug doses to three decimal places — haven’t fully worked through what that change means for their specific tax position.
Section 24: The Stealth Tax Increase
Before April 2017, buy-to-let worked like any other business expense. Rental income minus allowable costs (including mortgage interest) equalled taxable profit. If your rent was £12,000 and your mortgage interest was £7,000, your taxable profit was roughly £5,000.
Section 24 of the Finance Act 2015 ended this for individual landlords. Mortgage interest is no longer deductible from rental income. Instead, you receive a 20% tax credit on the interest paid.
For a basic rate taxpayer, this makes no material difference. You were paying 20% and now get 20% back — the net effect is zero.
For a higher rate taxpayer — which describes almost every consultant in the UK — the effect is significant.
A worked example:
- Annual rental income: £12,000
- Mortgage interest: £7,000
- Other allowable costs (management fees, insurance, maintenance): £1,500
Before Section 24: Profit = £12,000 − £7,000 − £1,500 = £3,500. Tax at 40% = £1,400.
After Section 24: Profit = £12,000 − £1,500 = £10,500 (mortgage interest no longer deductible). Tax at 40% = £4,200. Minus 20% credit on £7,000 = £1,400. Net tax = £2,800.
Same property. Same mortgage. Same rent. Tax bill doubled.
There’s a further complication: the £10,500 adds to your total taxable income. If it pushes you over £100,000, your personal allowance begins to taper, meaning your effective rate rises further still.
Most doctors with buy-to-let are still running the pre-2017 numbers. Their sense of what the property is returning is based on a tax regime that no longer applies to them.
What the Real Numbers Actually Look Like
A representative example. Property value: £220,000. 75% LTV mortgage at 5% interest. Gross yield: 4.5%.
- Annual rental income: £9,900
- Annual mortgage interest: £8,250
- Management fees (12%): £1,188
- Maintenance and void allowance (10% of rent): £825
- Landlord insurance: £250
- Cash flow before tax: −£613
The property runs at a cash loss before any tax is applied.
Apply Section 24: taxable income = £9,900 − £1,188 − £825 − £250 = £7,637. Tax at 40% = £3,055. Minus 20% credit on £8,250 interest = £1,650. Net tax = £1,405.
Annual net position: −£2,018.
The only way this makes financial sense is if capital appreciation outpaces the annual running loss — which requires a market prediction, not a financial certainty.
Add in the SDLT surcharge of 3% on the purchase price for additional dwellings, and CGT of 24% for higher rate taxpayers on exit, and the headline appeal of buy-to-let needs serious stress-testing.
When Buy-to-Let Does Work
This is not an argument against property investment. It’s an argument for running the real numbers before committing significant capital.
Buy-to-let genuinely works when:
You’re buying at a meaningful discount. Auction properties, estate sales, motivated sellers — buying 15-20% below open market value changes the yield and equity position substantially from day one.
You hold through a limited company. Mortgage interest IS fully deductible as a business expense inside a corporate structure. Section 24 applies only to individual landlords. The trade-offs — corporation tax on profits, dividend tax on extraction, typically higher commercial mortgage rates — make the maths different, but for doctors building a portfolio this structure often makes more sense. Get specific accountancy advice before proceeding.
You have genuine conviction about the location. Regeneration areas, infrastructure investment, supply-constrained markets — specific, researched conviction produces different results from generic “property goes up” reasoning.
You’re self-managing with reliable tenants. Removing the management fee recovers 10-15% of gross rent annually, which substantially changes the net return.
What to Do Instead (or Alongside)
The question isn’t “property or nothing.” It’s whether this is the right use of this capital for your specific goals.
REITs (Real Estate Investment Trusts) provide genuine property exposure — commercial, residential, diversified — without landlord responsibilities, Section 24, or a large SDLT bill on entry. Fully liquid. Can be held inside a Stocks and Shares ISA (£20,000 annual allowance), meaning no CGT on growth or income inside the wrapper.
Global index funds have returned approximately 7-9% annually over the long term. No management overhead, no void periods, no Section 24. The compound growth accumulates in the background.
Additional pension contributions — depending on your NHS pensionable pay, annual allowance position, and career stage — can be highly tax-efficient at 40-45% rates. Complex and worth specialist IFA input, but worth considering before directing capital elsewhere.
Five Things to Check Before (or Instead of) Buying a Buy-to-Let
- Run the post-Section 24 tax calculation. Taxable income = rent minus non-interest costs; tax at 40%; minus 20% credit on mortgage interest. That’s your real tax bill — not the pre-2017 figure.
- Model the true cash flow. Include management fees, a 10% maintenance allowance, one month’s void per year, insurance, and any leasehold charges. Be honest about whether the property is self-sustaining at current mortgage rates.
- Run the opportunity cost comparison. Take the deposit capital and model it in a global index fund at 7% compounded over 10, 15, and 20 years. This is arithmetic, not opinion. Do it before deciding.
- If you still want to buy, check the structure. A limited company may change the numbers significantly for higher earners. Speak to an accountant with specific experience in property and medical professionals before committing.
- Get regulated advice before any large capital decision. The figures in this post are illustrative. They are not personal financial advice.
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This post is for educational purposes only and does not constitute financial advice. Always do your own research and, if needed, ask for advice from a qualified financial adviser regulated by the FCA.
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