Real estate investment trusts (REITs) are looking more attractive than ever right now. That’s because in the latest Autumn Budget, buy-to-let landlords are facing yet another round of tax hikes on their rental earnings. But for those invested in REITs using an ISA, there’s a clever little tax loophole.
Beyond protecting an investor’s portfolio from capital gains and dividend taxes, ISAs also make any property income distributions from real estate trusts entirely tax-free. In other words, unlike a buy-to-let landlord (which can still be a lucrative endeavour even with the latest tax hikes), HMRC can’t touch any of the passive income generated inside an ISA.
So the question now is, which REIT stocks should investors consider buying right now?
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
A unique healthcare opportunity
The London Stock Exchange is home to a vast selection of high-quality property stocks capable of generating a substantial second income. However, the REIT that’s recently caught my eye is Primary Health Properties (LSE:PHP).
As a quick crash course, this is one of the largest healthcare-oriented landlords in the country, owning and leasing a vast portfolio of pharmacies, health clinics, and GP surgeries used by both public and private practices.
Looking again at the Autumn Budget, the government announced something rather interesting that might have created a strong and supportive tailwind for Primary Health. Specifically, it announced its plans to open another 250 neighbourhood health centres by 2035, with 120 ready by 2030.
What does this all mean? Since healthcare demand is constant even during economic downturns, the rental income from Primary Health’s portfolio has been impressively resilient. So much so that dividends have actually been hiked for over 25 years in a row.
What’s more, now that the government is creating a fresh wave of demand for more healthcare-oriented real estate, management’s able to invest with greater certainty, paving the way for lower-risk rental income growth. And that means even more sustainable dividend hikes could be on the horizon.
What’s the catch?
Primary Health Properties appears to be perfectly positioned to benefit from the government’s shift in spending priorities. Nevertheless, even with robust future growth prospects, no investment’s ever without risk.
Building out healthcare infrastructure isn’t cheap. And as a consequence, the company has amassed a significant debt load. As of June 2025, the group’s loan-to-value ratio stands at a lofty 48.6%. And while the group’s net rental income is large enough to cover its dividend obligations, any sudden lease cancellations or a wave of non-renewals could prove problematic.
This risk is particularly elevated when it comes to the NHS. Close to 90% of the group’s rental income stems from NHS contracts. And while the government’s currently providing financial support to the NHS, that could change in the future, potentially putting Primary Health’s cash flow at risk.
The bottom line
Overall, I think Primary Health Properties presents a compelling income opportunity. Like many other REITs, the business carries a large chunk of debt. But with its yield sitting above 7%, investors are being well-compensated for this risk.
That’s why I think it’s a stock worth looking at a bit more closely for an ISA. And it’s not the only REIT I’ve got my eye on right now.
