Sharia-compliant finance for UK rental property
In the United Kingdom, Islamic rental property finance is a buy-to-let purchase plan in which a bank co-owns or leases the investment property, and the landlord pays rent on the bank’s share instead of interest on a loan.
Two ways to structure an Islamic buy-to-let
Providers offer two payment profiles. “Rent only” plans charge rent on the bank’s share for the whole term, with the landlord buying that share in one payment at the end, much like an interest-only mortgage. “Acquisition and rent” plans add monthly purchases that reduce the bank’s share.
The underlying contracts are diminishing musharakah with ijara at Gatehouse Bank, ijarah at Kuwait Finance House (UK), and commodity murabaha with profit-only payments at Nomo. In each case the bank’s return is linked to an asset or a trade, not to a loan of money.
Why most landlords choose rent-only
Rent-only plans keep monthly payments low, which helps the property pass the rental cover test. The trade-off is that the landlord must refinance, sell or use savings to buy the bank’s share at maturity, so an exit plan is part of the application.
Owning through a limited company
Gatehouse Bank finances UK-registered limited companies, LLPs and special purpose vehicles, and KFH (UK) accepts private investment companies, partnerships and trusts. Company ownership affects corporation tax, SDLT surcharges and personal guarantees, so the structure should be chosen with an accountant before applying.
How HMRC taxes the rent paid to the bank
The alternative finance provisions treat the bank’s profit element as equivalent to interest. For individual landlords this means the same restriction applies as for mortgage interest: finance costs are not deducted from rental income but give a tax credit at the basic rate of 20%.
Companies can generally deduct the alternative finance return as a finance cost under corporation tax rules. The capital repayment element, meaning the purchase of the bank’s share, is never deductible, whether the plan is Islamic or conventional.
Stamp duty on an investment purchase
Buy-to-let purchases in England and Northern Ireland pay Stamp Duty Land Tax with the surcharge for additional dwellings, which rose to 5 percentage points in October 2024. Alternative finance relief under the Finance Act 2003 still prevents the Islamic structure from adding a second charge.
Regulation of buy-to-let purchase plans
Business buy-to-let is not regulated by the FCA. Gatehouse Bank says on its own pages that its buy-to-let products fall outside FCA regulation and are sold on an execution-only basis. Consumer buy-to-let, such as letting an inherited home, follows a lighter separate regime.
Who offers Islamic buy-to-let in 2026?
Gatehouse Bank is the most active lender, financing from £75,000 up to £5 million, with HMOs and multi-unit blocks allowed for experienced landlords. Kuwait Finance House (UK) offers ijarah buy-to-let from £250,000 in London, the Home Counties, Manchester and Milton Keynes.
StrideUp mentions buy-to-let purchase plans alongside its residential product, and Nomo serves Gulf-based investors through an app. AlRayan Bank still supports existing buy-to-let customers, but new property finance is now aimed mainly at clients from Gulf countries.
Limits investors should expect
Maximum finance is usually 75% to 80% of value, below the most generous conventional lenders. Holiday lets, serviced apartments and studio flats are often excluded, and few providers lend in Scotland or Northern Ireland, which narrows choice for portfolio landlords.
Applying for a buy-to-let purchase plan
- Decide whether to buy personally or through a limited company or SPV.
- Check the deposit: Gatehouse requires at least 20% up to £2m, 25% up to £3m and 30% up to £5m.
- Obtain a rental estimate from a local letting agent to support the rental cover calculation.
- Choose rent-only or acquisition and rent, and decide whether to pay a higher fee for a lower rate.
- Submit identity, income, portfolio and company documents through the provider or a broker.
- Let the bank arrange a valuation that includes an assessment of achievable rent.
- Complete through a solicitor, then register any company ownership changes with HMRC and Companies House.
Landlords with existing conventional buy-to-let mortgages can also refinance into a purchase plan. Gatehouse and Nomo both mention refinancing, and it is worth checking early repayment charges on the old mortgage before switching.
Costs and documents for landlords
| Item | What to expect | Note |
|---|---|---|
| Deposit | 20% to 30% at Gatehouse; up to 70% finance at KFH (UK) | Lower finance-to-value for HMOs |
| Product fee | Choice of fee levels; Gatehouse lowers the rate if 3% or more is paid upfront | Can usually be added to finance |
| Application fee | KFH (UK): 1%, plus 0.25% for portfolio landlords | Charged on finance amount |
| Valuation | Paid upfront, includes rental assessment | KFH (UK) minimum £800 plus VAT |
| SDLT | Standard rates plus 5% additional dwellings surcharge | LBTT and LTT apply in Scotland and Wales |
| Documents | ID, income proof, property schedule, tenancy agreements, company documents | Overseas landlords add translated proof of income |
Mistakes that commonly block approval
- Rental income too low to meet the provider’s cover test at the stressed rate.
- No landlord experience when applying for an HMO or multi-unit block.
- Personal income below the minimum, such as Gatehouse’s £18,000 threshold for at least one applicant.
- No credible plan to buy the bank’s share at the end of a rent-only term.
- Properties excluded by the provider, such as holiday lets or short leases.
Can rent from tenants be paid straight to the bank?
No. Tenants pay the landlord, and the landlord pays rent to the bank under the purchase plan. The two agreements are separate, so the landlord carries the risk of voids, arrears and maintenance costs during the term.
Do expat landlords qualify?
Yes, often. Gatehouse Bank considers UK expats and international residents from more than 190 countries, and KFH (UK) accepts foreign-currency income. Non-resident buyers pay an extra 2% SDLT surcharge and must report UK rental income under the Non-Resident Landlord Scheme.
Is a rent-only plan still Sharia-compliant?
Scholars generally accept rent-only ijarah because the bank owns the asset and earns rent for its use. The final purchase must be at a price agreed under the contract terms, and the bank must keep genuine ownership risk during the lease.
Can the property be let to family members?
Most buy-to-let plans require an arm’s-length tenancy. Letting to close family usually turns the arrangement into a regulated consumer case or falls outside the provider’s criteria, so it should be disclosed before applying.
Where to access these solutions
- Gatehouse Bank – Buy-to-Let Purchase Plan — Islamic bank offering rent-only and acquisition-and-rent buy-to-let plans to individuals, limited companies, expats and HMO landlords.
- Kuwait Finance House (UK) – Ijarah plans — Islamic bank offering ijarah buy-to-let finance from £250,000 to individuals, SPVs, partnerships and trusts, mainly in London and the South East.
- Nomo (BLME) – Rental property finance — Digital Islamic bank brand of BLME offering profit-only rental property finance on UK homes, mainly to Gulf-based investors.
Official and legal references
- HMRC SDLT Manual – Alternative property finance — HMRC guidance on SDLT reliefs that stop Islamic property finance from creating a second land tax charge.
- Finance Act 2003, section 71A — Statutory relief for land sold to a financial institution and leased back to the buyer under an ijara structure.