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Essential Tax Tips for Landlords

Wed 05 Mar 2025

Molly Walters, Director

Navigating Tax for Landlords: A Practical Guide

Being a landlord comes with its fair share of responsibilities, and one of the most important aspects to manage is tax. Understanding your tax obligations can help you stay compliant, avoid unexpected bills, and maximise your rental income. In this guide, we’ll walk you through the key tax considerations for landlords in the UK.

1. Types of Tax Landlords Need to Consider

Income Tax on Rental Income

Landlords must pay income tax on rental profits, which is calculated as:

Total Rental Income - Allowable Expenses = Taxable Profit

Rental income is added to your overall earnings and taxed according to your income tax band. You must declare this income through a Self Assessment tax return.
 

Capital Gains Tax (CGT)

If you sell a rental property for more than you originally paid, you may be liable for CGT on the profit. The current CGT rates for residential property are:

  • 18% for basic-rate taxpayers

  • 24% for higher and additional-rate taxpayers (as of April 2024)

Each individual has an annual tax-free CGT allowance, but this has been significantly reduced in recent years.
 

Stamp Duty Land Tax (SDLT)

When purchasing additional properties, landlords must pay an extra 3% SDLT surcharge on top of standard rates.
 

Inheritance Tax (IHT)

If you plan to pass your property portfolio on to family members, it’s essential to consider how Inheritance Tax (IHT) may apply.
 

2. Allowable Expenses and Deductions

Reducing your tax bill legally means making the most of allowable expenses. These include:

✅ Mortgage interest (limited by the mortgage interest tax relief rules)
✅ Letting agent fees
✅ Property repairs and maintenance
✅ Insurance (landlord insurance, buildings, and contents insurance)
✅ Council tax and utility bills (if paid by the landlord)
✅ Accountant fees
✅ Legal costs for evictions and tenancy agreements
 

3. Recent Tax Changes Impacting Landlords

  • Mortgage Interest Relief – Landlords can no longer deduct mortgage interest directly from rental income. Instead, they receive a 20% tax credit.

  • Reduction in CGT Allowance – The tax-free allowance for CGT has dropped significantly, increasing potential tax liabilities.

  • Making Tax Digital (MTD) – From 2026, landlords earning over £50,000 per year must use digital tax software for Self Assessment.
     

4. Tax Planning Strategies for Landlords

To optimise your tax position, consider these strategies:

- Holding Property in a Limited Company – Corporation tax rates (currently 25%) may be lower than personal tax rates, making this an attractive option for landlords with multiple properties.
- Joint Ownership – Spreading rental income between spouses can reduce the tax burden if one partner is in a lower tax band.
- Using Pension Contributions – Making pension contributions can reduce taxable income and lower overall tax liabilities.
- Claiming All Allowable Expenses – Keep meticulous records to ensure you claim all possible deductions.
 

5. How to Stay Compliant

  • Keep Accurate Records – Maintain receipts, invoices, and financial statements for at least six years.

  • Submit Self Assessment Returns on Time – The deadline is 31st January for online submissions.

  • Seek Professional Advice – A specialist property accountant can help you structure your portfolio tax-efficiently.
     

Stay Ahead with Howells Property Management

Managing a rental property is more than just collecting rent—it’s about making smart financial decisions to protect your investment. If you’re a landlord looking for expert advice and hassle-free property management, we are here to help.
Get in touch with our team today to ensure you’re making the most of your rental income while staying fully compliant with the latest regulations.