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Buy-to-let vs Pension Calculator

Compare projected after-tax returns from a buy-to-let property versus contributing the same money into your pension.

Cash & timeframe

£
years

Buy-to-let assumptions

£
%
%
%
%
%
%

Pension assumptions

%
%

Buy-to-let outcome

Stamp duty

£15,000

Mortgage required

£165,000

Net annual rental income

-£510

Final property value

£451,528

Net of mortgage, CGT & rent reinvested

£224,457

Pension outcome

Pension pot at end

£320,714

Net of tax on drawdown

£272,607

Difference

Pension ahead by

£48,149

Indicative comparison only. Buy-to-let modelling uses simplified SDLT (with the 5% additional-home surcharge), Section 24 mortgage interest treatment, and assumes net rent is reinvested at the property growth rate. Pension modelling assumes 25% tax-free cash and the rest taxed at your chosen marginal rate. Doesn't model void periods, agent fees, repairs, or pension IHT changes.

Buy-to-let vs pension — how the maths actually compares

Comparing a buy-to-let with a pension is rarely an apples-to-apples calculation. Pensions get income tax relief on the way in (so a higher-rate taxpayer effectively pays £60 for £100 of pension), are shielded from capital gains tax inside the wrapper, and (until April 2027) usually fall outside the estate for inheritance tax. Buy-to-let property is bought with after-tax cash and is taxed on rental income, capital gains on disposal, and (from a buyer's perspective) the additional 5% stamp duty surcharge for second homes.

This calculator compares the two side by side, showing the projected end value, total tax paid, and net income after retirement. The right answer depends on your tax band, time horizon, leverage assumptions, and how much you value the liquidity and diversification of a pension versus the tangibility and gearing of property.

Related tools and guides

  • Buy-to-let returnsModel BTL yield and ROI in detail.
  • Pension advisorsFind a UK pension specialist.
  • Mortgage advisorsBTL-experienced UK mortgage brokers.
  • Speak to a financial advisorFree initial consultation with an FCA-verified UK advisor.

Frequently asked questions

Is buy-to-let still worth it in the UK?

It can be — but the post-2017 changes to mortgage interest relief, the additional stamp duty surcharge, and the loss of wear-and-tear allowance have materially reduced returns for higher-rate taxpayers holding BTL personally. Many investors now compare BTL via a limited company or use property funds inside a pension.

How does pension tax relief work?

Personal contributions get basic-rate relief at source. Higher- and additional-rate taxpayers reclaim further relief through self-assessment. Effective contribution costs are 80p, 60p, or 55p per £1 in the pot.

What about diversification?

A pension can hold global equities, bonds, and property funds. A single buy-to-let concentrates risk in one property and one regional rental market. Many advisors recommend a blend rather than an either-or.

Can I use my pension to buy a buy-to-let property?

Not directly. Self-invested pensions such as SIPPs and SSASs face heavy tax charges if they hold residential property, but they can hold commercial property and property funds.

How is rental income taxed in 2026/27?

Rental profit is taxed at your income tax rate. Mortgage interest cannot be deducted; instead you get a tax credit at 20% of the interest (Section 24), which the calculator models. From 6 April 2027, property income will be taxed at separate rates of 22%, 42% and 47%, and the credit rises to 22%.

What capital gains tax will I pay when I sell?

In 2026/27, gains above the £3,000 annual exempt amount are taxed at 18% within your basic-rate band and 24% above it. You must report and pay the tax on a UK residential property sale within 60 days of completion.

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