What Do First-Time Landlords Need to Know?
First-time landlords need to know that the money is thinner than the rent suggests and the mistakes are expensive. On the average English rent of £1,451 a month, a mortgaged single let leaves a higher rate taxpayer a few hundred pounds a year once costs and Section 24 have taken their share.
This is the reality check rather than the checklist. It covers what a let earns after every cost, what the common first-year mistakes are worth in pounds, and which parts of a policy new landlords cut and then need.
Every figure here is current as at September 2026, after the Renters’ Rights Act 2025 came into force on 1 May 2026. Section 21 is gone, so the numbers around arrears and possession are not the ones on older landlord guides.
A first let earns far less than the headline rent once mortgage interest, insurance, letting fees, maintenance and empty months come out of it. Section 24 is the rule new landlords miss most often, because mortgage interest no longer comes off your profit before tax is worked out. Compliance is where first-year mistakes get expensive, and gas, electrics, deposit protection and right to rent all carry their own deadlines. The policy sections first-timers cut to save money, such as rent guarantee and legal expenses, tend to be the ones they later need.
Compare buy-to-let insurance quotes before your first tenancy starts.
- What does a single let earn after every cost?
- Which tax rule catches new landlords out?
- What does one void month cost you?
- How long does a possession claim take now?
- Which compliance duties do first-timers miss?
- What do first-year landlords get wrong most often?
- Which insurance sections do first-timers skip and then need?
- Frequently asked questions (FAQs)
What does a single let earn after every cost?
Less than almost every first-time landlord expects. A £1,450 a month house on a 75% loan to value mortgage throws off about £3,090 of cash before tax, and a higher rate taxpayer keeps roughly £138 of it.
The annual numbers on a £1,450 a month let
The worked example below is a £220,000 house in England let at £1,450 a month, bought with a £55,000 deposit and a £165,000 interest only buy-to-let mortgage at 5.2%. The rent is the Office for National Statistics average for England in July 2026.
| Line | Amount a year | Where the figure comes from |
| Rent at £1,450 a month | £17,400 | ONS average English private rent, July 2026 |
| Void allowance | -£1,000 | Three weeks a year, or one empty month every 18 months |
| Letting agent, 12% plus VAT | -£2,360 | Full management on rent actually collected |
| Landlord insurance | -£280 | Buildings, property owners‘ liability and loss of rent |
| Maintenance and repairs | -£1,700 | 10% of rent, the working figure most landlords use |
| Safety certificates | -£140 | Annual gas check plus EICR and EPC spread over their cycles |
| Accountancy | -£250 | Self Assessment with the property pages |
| Taxable rental profit | £11,670 | Mortgage interest is not deductible from this |
| Mortgage interest | -£8,580 | £165,000 at 5.2%, interest only |
| Cash generated before tax | £3,090 | What lands in your account |
| Tax, basic rate landlord | -£618 | £2,334 less the £1,716 finance cost credit |
| Tax, higher rate landlord | -£2,952 | £4,668 less the £1,716 finance cost credit |
| Net after tax, higher rate | £138 | Before stamp duty, purchase fees or capital growth |
Why the yield figure flatters the deal
That property shows a gross yield of 7.9%, which reads like a good investment. The same deal returns a quarter of one percent on the £55,000 of cash a higher rate taxpayer put in.
Gross yield ignores the mortgage, the tax and the void, which is why it is the number estate agents quote. Run the full line-by-line before you offer, not after completion.
Which tax rule catches new landlords out?
Section 24 of the Finance (No.2) Act 2015. Mortgage interest stopped being a deductible expense for individual landlords, so you are taxed on rent that has already gone to your lender.
How the finance cost restriction works in numbers
HMRC restricts relief on residential finance costs to a basic rate tax reduction of 20%, whatever rate you pay. On £8,580 of interest that credit is worth £1,716.
A higher rate landlord who could once deduct the interest in full is £1,716 a year worse off, every year, on one property. That is the whole difference between the £138 and the £1,854 the same let would have produced before the rule.
Look again at the table and the effect is starker. The £2,952 tax bill takes 96% of the £3,090 the property generated in cash.
The threshold you can cross without noticing
Rental profit stacks on top of your salary, and it is the £11,670 pre-credit figure that counts, not the £3,090 you banked. A landlord earning £45,000 is pushed well past the £50,270 higher rate threshold by a single let.
Making Tax Digital for Income Tax already applies to qualifying income above £50,000 from April 2026, dropping to £30,000 in April 2027 and £20,000 in April 2028. Qualifying income is measured before expenses, so gross rent is what counts.
Two properties at this rent put you over the 2027 threshold on their own. Quarterly updates and digital records are a different habit from a shoebox of receipts in January.
What does one void month cost you?
Around £2,400 to £3,600 once the re-letting costs are added to the lost rent. It is the most underestimated line in a first-time landlord’s budget.
The full bill for four empty weeks
The obvious cost is £1,450 of rent you never receive. The rest of the bill is the part new landlords forget to model.
- Council tax reverts to you the day the tenancy ends, at roughly £150 to £220 a month on a band C or D house.
- Gas and electricity standing charges keep running at about £25 a month even with nothing switched on.
- A tenant-find fee of half a month’s rent plus VAT is another £870, and referencing and a fresh inventory add £120 to £200.
- Your mortgage payment of £715 a month does not pause, which is why the reserve matters more than the rent.
Why an empty property changes your cover
Most landlord policies restrict cover once a property has stood empty for 30 to 45 days, usually back to fire, lightning and explosion only. A longer gap needs unoccupied property cover added to the policy.
Tell your insurer the day the keys come back, not the day you remember. A burst pipe in an undeclared empty property is the easiest claim an insurer will ever decline.
How long does a possession claim take now?
About ten months from the first missed payment to getting the keys back, and roughly £16,000 of lost rent and costs on this example. Section 21 no longer exists, so there is no fast route left.
The arrears clock under ground 8
Every tenancy is now a periodic assured tenancy, and the mandatory arrears ground needs three months of unpaid rent before you can serve notice. On a £1,450 rent that is £4,350 gone before the clock even starts.
The notice period is four weeks, which adds another £1,450. The arrears must still stand at three months on the day of the hearing, so a part payment the night before can drop you onto a discretionary ground.
What the court stage costs
Ministry of Justice figures for April to June 2026 put the median time from a private landlord possession claim to repossession at 27.1 weeks. That is a further £9,000 of rent on this property.
Undefended possession work runs £1,200 to £3,000 in solicitor fees and a defended claim can reach £6,000, before court and bailiff fees. Rent guarantee insurance costs £150 to £300 a year and legal expenses cover costs £30 to £100.
Against a £16,000 exposure, those are the two cheapest lines on the schedule. They are also the two first-time landlords most often decline.
Which compliance duties do first-timers miss?
Deposit paperwork, right to rent checks and the EICR. Each of those three carries a penalty larger than a year’s profit on the let.
The ones that cost you money
A deposit has to be protected in an approved scheme within 30 days, and the prescribed information has to reach the tenant as well. Miss either and a court can award one to three times the deposit, which is £1,675 to £5,025 on a five week deposit at this rent.
A right to rent check on every adult occupier is a legal requirement in England. The civil penalty is £10,000 per occupier for a first breach and £20,000 for a repeat, not the £3,000 figure still quoted on older landlord blogs.
An EICR from a qualified electrician is needed every five years, with C1 and C2 defects put right within 28 days. The Electrical Safety Standards Regulations 2020 allow a penalty of up to £30,000 for each breach.
The annual gas safety check has to be done by a Gas Safe registered gas engineer, with the record handed over before the tenant moves in. An EPC of band E or better is required to let at all, with penalties up to £5,000 per property.
The ones that cost you possession
Compliance is not only about fines, it decides whether your notice is any good. Serve a possession notice with the gas record, EPC or deposit paperwork out of order and the claim can be thrown out at the door.
The private rented sector database and the landlord ombudsman are both in the Renters’ Rights Act but are not in force as at September 2026. Once the database starts, most possession orders will be closed off to landlords who have not registered.
Blanket bans on pets, children or benefit claimants are unlawful, so a policy written for tenants on housing benefit is now a practical need rather than a niche. Penalties for discrimination start at £7,000 and reach £40,000 for repeat or serious breaches.
What do first-year landlords get wrong most often?
The same nine mistakes, in roughly the same order, and each one has a price. Added together they cost several times the first year’s profit.
The costed mistake list
| Mistake | What it costs | What to do instead |
| Letting on a home insurance policy | Claim declined and policy voided, on escape of water claims averaging about £2,600 | Buy a landlord policy before the tenant moves in |
| Declining rent guarantee cover | Up to £16,000 across a full arrears and possession run | £150 to £300 a year buys 6 to 12 months of arrears |
| Deposit protected late or no prescribed information | £1,675 to £5,025 in compensation plus a civil penalty up to £7,000 | Protect within 30 days and serve the prescribed information the same week |
| Skipping the right to rent check | £10,000 for a first breach and £20,000 for a repeat | Check and copy documents for every adult before move-in day |
| No maintenance reserve | A boiler replacement alone is £2,500 to £3,500 | Hold 10% of rent plus three months of mortgage payments |
| No void allowance in the budget | £2,400 to £3,600 for a single empty month | Budget three weeks a year from the first tenancy |
| Insuring for market value instead of rebuild cost | 20% to 30% of the premium wasted every year | Use the rebuild figure from the mortgage valuation |
| Telling HMRC late | £100 late filing penalty plus interest, and up to 30% of the tax for a careless failure to notify | Register by 5 October after your first tax year of rental income |
| Claiming improvements as repairs | The deduction is disallowed and the tax becomes payable with interest | Set improvements against capital gains when you sell instead |
The mistake behind the other eight
Nearly all of them come from treating a let as passive income. A rental property is a small business with statutory duties bolted on, and it needs a float in the same way any business does.
Buying a second property before the first has survived a void or a difficult tenant doubles the exposure. A multi-property policy costs less per property, but two lets also double the compliance calendar.
Which insurance sections do first-timers skip and then need?
Rent guarantee, legal expenses, accidental damage and home emergency. They are the cheapest lines on the schedule and the first four struck off to save £100 at renewal.
What each section costs and what it pays for
Only landlord buildings cover is close to compulsory, because the lender insists on it. Everything else is a judgement about which loss you could fund yourself.
| Policy section | Typical cost a year | What it pays for | Skipped by first-timers |
| Buildings | £150 to £300 | Rebuild after fire, flood, storm or subsidence | Rarely |
| Property owners’ liability | Usually included | £1m to £5m for injury claims by tenants or visitors | Rarely |
| Loss of rent after an insured event | Usually bundled with buildings | Rent while the property is uninhabitable | Often unchecked |
| Landlord contents | £30 to £90 | Carpets, white goods and any furniture you supply | Often |
| Rent guarantee | £150 to £300 | 6 to 12 months of arrears while you regain possession | Very often |
| Legal expenses | £30 to £100 | Possession proceedings, deposit disputes and tax enquiries | Very often |
| Accidental damage | £25 to £60 | One-off tenant mishaps outside the named perils | Very often |
| Home emergency | £50 to £120 | Out of hours boiler, leak and lockout call-outs | Often |
The two that earn their keep fastest are accidental damage and home emergency cover, because both pay out on the small events that happen in year one.
Check whether loss of rent is included and at what limit, and whether your contents cover reaches the carpets and white goods you left behind.
The policy mistake that undoes all the others
Leaving the property on home insurance is the one error that cancels every other decision. The insurer voids the policy from inception once it learns a tenant was living there, and the voidance is then disclosable on every future application.
Our guide to landlord insurance versus home insurance sets out where the two wordings part company. The short version is that tenant occupancy is a material fact and silence is a non-disclosure.
If your first let is a leasehold flat, the freeholder insures the structure through the block policy and recharges you in the service charge. You still need contents, liability and loss of rent in your own name.
Ask the managing agent for the block of flats policy schedule so you can see the rebuild sum and the excess you would pay on a claim.
Frequently Asked Questions (FAQs)
Yes. Letting a home on a residential mortgage without consent to let breaches your loan conditions, and lenders can charge a higher rate or demand repayment.
Mandatory licensing applies to larger houses in multiple occupation, and over 100 councils run selective schemes covering ordinary lets in named areas. Three or more tenants from separate households also makes the property an HMO for insurance, so it needs HMO insurance rather than a standard landlord policy.
Five weeks’ rent where the annual rent is under £50,000, or six weeks where it is £50,000 or more. You cannot charge a separate pet deposit on top.
You have to consider a written request and cannot refuse it unreasonably. A freeholder’s ban on pets in the lease is a reason a tribunal would accept.
No. You must advertise a fixed asking rent and cannot invite or accept bids above it, with a civil penalty of up to £7,000 for a breach.
Grounds 1 and 1A cover both, with four months’ notice. Neither can be used in the first 12 months of a tenancy, and you cannot re-let for 12 months afterwards.
Yes, and it is worth doing. Rental losses carry forward against future rental profits, so an unclaimed year one loss is money you never get back.
You must give the tenant a written statement of the tenancy terms under the Renters’ Rights Act. Use a template from a recognised landlord body rather than drafting one yourself.
On this example, about £1,700 a year for maintenance plus £2,150 to £4,300 covering three to six months of mortgage payments. Build it before you buy, not out of the first year’s rent.
Full management runs 8% to 15% of rent plus VAT, and tenant-find alone is usually half to one month’s rent plus VAT. Self-managing saves that but puts every compliance deadline on you.
Companies still deduct mortgage interest in full, which is why incorporation appeals to higher rate landlords. Mortgage rates are higher and moving an existing property into a company can trigger stamp duty and capital gains tax.
No, it is general information current at September 2026. Your own position depends on your other income, so check the figures with an accountant or against HMRC guidance before you file.