How Much Do Landlords Make A Year In The UK?


How Much Do UK Landlords Earn A Year?

There are many people who have decided to invest in property rather than leave their savings in a bank account earning very little interest. Some view their investment as a pension fund for the future, whilst others have sought to replace their active income with passive income. So how much do landlords make a year in the UK?

According to a 2018 Private Landlords Survey, landlords earn an average of £15,000 a year in the UK. The amount a landlord earns primarily depends on the number of properties they own, the location and type of properties they let. Market conditions will also have an affect on a landlords income.

Investing in property doesn’t guarantee that they will ever become rich, but by taking full control of their own finances and investments, they stand a greater chance of becoming wealthy over time.

There is a misconception that landlords do nothing, and at the same time receive large amounts of money. In reality, that is not the case. Being a landlord requires a lot of time and effort, especially if they are managing the property themselves. On the other hand, if a property is managed through a letting agent, the landlord will have more time for themselves and less involvement with the daily maintenance of the property, but they will have to pay for the service which will affect their bottom line.

Is It Profitable To Be A Landlord In The UK?

With a small amount of the right knowledge, it can be profitable to be a landlord in the UK. Providing you buy right, in the right location where there is demand for rental property, anyone can succeed as a landlord with the caveat that they provide an exemplary service to their customers; tenants. 

Landlords are required to adhere to legislation and regulations, but don’t let this put you off if you are considering investing in a buy-to-let property. There are plenty of businesses and organisations that are available to ensure you are compliant as a landlord. Some services are free and others are paid for e.g. letting agents.

If you are considering purchasing an investment property, I want you to know that it can be done and there is plenty of support available to you. But it will require a lot of time and effort at the beginning.

Some people consider property investment as high risk, but I would like to assure you that with just a small amount of the right knowledge, the risk can be reduced significantly. Oh, and the knowledge you will need is available online and elsewhere for free.

Interesting Statistics From The Private Landlord Survey 2018

According to a 2018 Private Landlords Survey conducted by the Ministry of Housing, Communities and Local Government, 94% of landlords in the UK are private individuals earning an average of £15,000 a year before tax and other deductions. 61% of them have a rental income of less than £20,000, 26% earn between £20,000 and £49,999, while 13% earn above £50,000.

45% of landlords have only one rental property, 38% have between two and four properties and 17% of landlords have five or more properties. More than half of the respondents or 59% of them are older than 55, which is not surprising given that most people buy a second property later in life. Approximately 33% of landlords are retired and 70% of them rent the property for 6 years or more before deciding to sell; either to exit the market or to purchase elsewhere.

There are approximately 3.4 million registered tenancy deposits with one of the three government Tenancy Deposit Schemes. This corresponds to an estimated 1.5 million landlords.

Most landlords, around 94%, are individual private investors with buy-to-let properties, whilst 4% have invested through their own registered company and 2% have invested through another type of organisation.

The survey also highlights that since 2010, the proportion of landlords who only own one buy-to-let property has declined from 78% to 45%, and the proportion of landlords who own five or more buy-to-let properties has increased from 5% to 17%. This indicates that those who have invested have had a good experience and have decided to grow their portfolio.

What Are The Set Up Costs For A Landlord?

Investing in a buy-to-let property is not cheap, and like most businesses, it requires capital to get started. Here is a breakdown of costs that you can expect to incur when investing in a rental property:

ItemAmountRemarks
Deposit25% of property purchase priceCan be as low as 15% but mortgage interest rates will likely be higher compared to a 25% deposit
Stamp Duty Land Tax0-5% of property purchase price below £925,000Rates from 1 April 2021
Stamp Duty Land Tax Surcharge3% of property purchase priceRates from 1 April 2016
Mortgage FeesBetween £0-£2,000 arrangements feesThese fees can typically be added to the mortgage
Solicitor /Conveyancer£600-£1,500Dependant on size and location of the property
Landlord Insurance£300 plusDependant on size, location, use, type of tenancy
Certification£300-£500Energy Performance Certificate (EPC), Gas Safe and Electrical Inspection Condition Report (EICR)
Tenant Find£0-£600Dependant on number of tenants and property management service provided

Although there are several fees and expenses associated with purchasing an investment property, people with cash savings should take the time to calculate the potential return on investment they could receive, against the potential interest they are likely to make with their cash sat dormant in a savings account.

Property investment can work very well over the mid to long term. I wrote an article about the average time it takes for property prices to double in the UK, based on recorded figures since 1952.

What Are The Running Costs For A Landlord?

Landlords with a mortgaged buy-to-let property incur the following running costs:

ItemAmountRemarks
Mortgage Payments1.49-4.99% of loan amountDependant on amount of deposit and mortgage terms
Management Fees0-15% of monthly rental incomeFrom self management to full management through a letting agent
Repairs and Maintenance0-10%Dependant on whether the property is let furnished, part furnished or unfurnished
Voids0-2 monthsUp to 2 months expenses per year for times when the property may not be tenanted
Insurance£300 plusDependant on size, location, use, type of tenancy
Gas Safe Certificate£60On Average Per annum
EICR£125On average every 5 years
EPC£60Every 10 years

The amount paid in running costs will depend on the type and size of property, the number of tenants and the type of tenancy agreement. There isn’t an exact science to calculating the amount that will be needed to cover repairs, maintenance and void periods, but by allocating the approximate amount and percentages listed in the table above, it will help you to offset any incidences.

How Much Can A Landlord Raise Rent In A Year?

There is no rule that determines exactly how much a landlord can raise the rent within a year in the UK, but there are conditions that a landlord must comply with. A rent increase can only be considered once a fixed term tenancy agreement has ended.

Any increase in rent needs to be realistic with comparable properties on the local market or the landlord could struggle to find tenants. Landlords regularly review the rental market and if market conditions change, taxes and living costs increase, or maintenance is required within the property to make improvements, then there is good reason for the landlord to review the current rent that is being charged.

How Much Tax Do Landlords Pay?

Landlords are taxed on the rental income they receive minus allowable deductions. The rate of tax that landlords are required to pay is determined by other sources of income. As rental income is added to other forms of income earned, it could move landlords into higher tax brackets.

For advice and guidance on how this could affect you before you start with investing in rental property, I can recommend contacting tony@tonygimple.com. Here is a short video with Tony and a brief introduction to buy-to-let tax:

Buy-To-Let Tax with Tony Gimple

Income from buy-to-let rental properties is to be reported on a Self Assessment Tax Return each year. Tax years run from April to March and new landlords will need to register online by 5 October following the tax year in which they received rental income.

For example, first time landlords who receive rental income from July 2020 through to March 2021, will need to register online by 5 October 2021.

How much you pay depends on how much profit you make and your personal circumstances. Your profit is the amount left when you add up the rental income and subtract the expenses or allowances you can claim.

There are different tax rules for residential properties, holiday lets and commercial properties. The most common are residential buy-to-let properties and allowable expenses are typically things that are required for the day-to-day running of the property, for example:

  • Letting agent or management fees
  • Buildings and contents insurance
  • Maintenance and repairs
  • Gas, electricity, water and broadband
  • Ground rent and services charges
  • Council tax
  • Services including cleaning and gardening
  • Other direct costs of letting a property including phone calls, stationery, advertising and milage/travel costs

Renovating a property to make improvements is classed as capital expenditure, and cannot be claimed as an expense. However, once the tenants have occupied the property and items provided by the landlord require either repair or replacing, they are considered an allowable expense.

The easiest way to assess whether an expense is an allowable deduction, is to ask yourself whether the item is being repaired or replaced. If the answer is yes, you will be able to deduct that expense. If the item is a new feature, it will be classed as a capital expense.

How Do Landlords Deal With Emergency Repairs?

Landlords have a responsibility to ensure that their tenants are living comfortable in habitable accommodation. This means that there is a constant supply of heating with hot and cold water, and that the building is water tight and free from any damp and external elements that are unwelcome.

Emergency repairs regarding heating and hot and cold water are to be dealt with within a 24 hour period. All tenants are to have direct contact with either their landlord, or the property management agent, to allow for emergency repairs to be attended to promptly.

As an experienced landlord, I would also advice that all repairs are dealt with quickly; whether they are considered an emergency or not. Leaving any type of repair or maintenance issue can cause further damage over time and risk increasing the cost of repairs at a later date. Direct communication with the tenants is the key to help ensure that your investment property is maintained to a high standard at all times.

Professional property investors thoroughly check properties before making offers and purchasing them. For example, they will check whether the property has a fully functional boiler and heating system, and if not, they will budget to have any old and dysfunctional systems replaced and will likely reflect this in their offer price to purchase the property.

I have created a free Property Viewing Checklist to assist both new and experienced property investors when they are visiting potential rental properties, to help avoid any unpleasant surprises after completion of the purchase.

How Do Landlords Budget For Emergency Repairs And Maintenance?

Budgeting for emergency repairs and maintenance is a crucial part of being a successful landlord.

The amount needed for a budget will depend on the age, type and size of the property, and the type of tenancy agreement and the number of tenants. 8-10% of the monthly rental income is generally a good rule of thumb to put aside for repairs and maintenance.

There isn’t a ‘one size fits all’ approach, but by simply saving a small amount of the rental income each month, landlords will reduce the risk of struggling to pay for unexpected high bills for repairs and maintenance in the future.

There is also an alternative approach. Landlords can choose to pay for insurance policies to cover the cost of emergency repairs and maintenance.

PlusHeat.co.uk provide flexible cover for landlords at 4 different levels; Standard, Premium, Platinum and Custom.

The Standard package includes cover for repairs to the boiler and controls, annual Gas Safety Certificate, an annual service to the boiler and repairs to the central heating system.

The Platinum service includes all the features of the Standard service plus, repairs to plumbing, electrics, drainage, roofing, home security, pest control and handyman jobs.

The Custom package provides landlords with a choice of the categories or utilities they would like to purchase cover for.

There are advantages and disadvantages to both approaches when budgeting for repairs and maintenance.

Landlords who put aside a percentage of their rental income can benefit from only paying for what they need to at the time. They may find they have a surplus after several years which could be used for additional improvements or personal gain. But they will have to make time to arrange quotes and settle bills when they are due.

Landlords who sign up to regular cover will have the piece of mind that they will not incur any unexpected high costs, and will have to spend little time in arranging repairs as they will simply have one point of contact. They may, however, end up paying for a service that they don’t need or use, and could have benefitted more by managing the repairs themselves.

The good news, is that landlords have a choice. And depending on how much time they have to look after and maintain their investment property, will likely determine their approach for budgeting and dealing with emergency repairs and maintenance.

Is Being A Landlord Worth it?

Absolutely! Providing people have a realistic approach when entering the property market, and providing they invest for the mid to long term, investors can benefit both financially and professionally as a landlord.

Real estate is the backbone of many successful businesses and entrepreneurs. That said, like any type of investing, success is not guaranteed. But by taking the time to learn the fundamentals of operating a buy-to-let property, you will have at least considered whether it could be right for you.

Remember, there are plenty of professional services that can help you start as a landlord. There are also plenty of free resources online and communities that can help to answer any questions you may have before getting started to. 

If you have shown an interest by reading this article, you owe it to yourself to find out a little more as to whether property investing is right for you. Just take a few minutes to browse my website and look at my guides. And please let me know if you still have any questions by sending an email to andy@monoperty.com, and I will do my best to help.

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Andy Walker

A Property Investor and Landlord with over 16 years of experience, providing free education and helping others to start or improve their Buy To Let business. More info on my About Me page.

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