Property has long been seen as a dependable investment option in the UK. Many consider bricks and mortar a solid, tangible asset, and buy-to-let can provide a steady income stream. However, as with all investments, property has its pros and cons – and the list of drawbacks has been growing steadily.
A series of tax and regulatory reforms have increased costs, reduced tax efficiency, and introduced greater administrative and compliance burdens – making owning and letting out UK residential property significantly less attractive. Many landlords, especially those living overseas, are finding that the risk–reward balance of property investment has shifted unfavourably.
Higher taxes
- Tax rates on rental income increase by 2 percentage points from April 2027.
- The 40% mortgage interest tax relief was replaced by a flat 20% rate tax credit in 2020.
- The additional stamp duty on second homes and rental properties introduced in 2016 increased from 3% to 5% from October 2024, with a further 2% surcharge for non-residents.
- The favourable tax regime for furnished holiday lets was abolished in 2025.
- The capital gains tax annual exemption fell from £12,300 in 2022 to £3,000 from 2024. On a positive note, the higher CGT rate on property was cut from 28% to 24% from 2024.
- Non-UK resident owners become liable to capital gains tax on UK residential and commercial property from 2015 and 2019 respectively – but only on gains made from those dates.
- UK residential property is now fully within the scope of inheritance tax.
Higher costs and lower net yields
- Borrowing costs have increased with interest rates.
- Maintenance, labour, building material and operating costs are rising.
- It costs more to meet regulatory and safety requirements.
Heavier regulation and lower flexibility
The 2025 Renters’ Rights Act, to be implemented in stages from May 2026, is a fundamental shift in the private rental sector.
- Tenants will have increased protections and can remain in the property until they give notice.
- No-fault evictions are abolished – landlords must provide a valid reason to terminate a lease.
- Rent increases will be limited.
Landlords face increased oversight, registration, ombudsman requirements and compliance checks.
More HMRC scrutiny, compliance and administrative burden
- Owning buy-to-let property now involves more intensive reporting obligations.
- Landlords must keep digital records and submit them quarterly.
- The likelihood of tax enquiries, penalties and retrospective assessments has increased.
Other potential disadvantages
- The risk of problematic tenants and property damage.
- Periods with no tenants.
- The time, stress and administrative burden involved.
- Significant transaction costs when buying or selling.
- Property is an illiquid asse; accessing capital quickly is difficult and you cannot usually sell only part of it.
- The high initial capital outlay makes it challenging to achieve adequate diversification and manage investment risk.
Why some investors are considering alternatives
These combined pressures have made it harder to achieve the returns seen a decade ago. Profit margins are tighter; risks are higher and administrative workloads heavier. Non‑property investments can offer several advantages, including:
- The potential for higher long‑term returns.
- Tax‑efficient growth through ISAs, pensions, life policies or other wrappers.
- Freedom from tenant issues, maintenance responsibilities and management demands.
- Generally lower running costs.
- High liquidity and ability to adjust your portfolio quickly.
- Greater diversification across asset classes, sectors and global regions to manage risk.
- Professional management with minimal day‑to‑day involvement required.
- The ability for assets to pass more smoothly to beneficiaries.
- More scope for effective tax planning.
Extra considerations for British expatriates owning UK property
Holding UK assets may not be in your best interests when living overseas long term. Your tax responsibilities and planning become more complex when complying with the rules of two jurisdictions.
UK property, along with other UK‑situated assets, always remains subject to UK inheritance tax. However, once you have been non‑UK resident for 10 years, non‑UK assets fall outside the scope of IHT. This makes the case for selling UK property even stronger, particularly when UK pensions will form part of your taxable estate next year.
In contrast, Portugal’s form of inheritance tax is restricted to Portugal-based assets left outside your immediate family.
Before selling UK property and reinvesting the proceeds, obtain personalised advice. A specialist will explain the UK and Portugal tax implications, determine the optimal timing for a sale, and design an investment portfolio aligned with your goals, situation and risk profile. They ensure you make full use of Portugal tax‑advantaged investment structures, for your benefit and your heirs.
If you are undecided about selling property, a wealth manager will help you weigh your options. They’ll guide you through the complexities, compare the benefits of real estate versus capital investments, calculate potential tax liabilities and assess income and growth potential, to help you build a tailored investment and estate planning strategy.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
