Being a landlord comes with tax responsibilities—but also legitimate ways to reduce your tax bill. The key is understanding what HMRC allows, what it restricts, and how to stay compliant.
Rental Income:
What Must Be Declared
You must declare all rental income, including:
• Monthly rent
• Payments for utilities paid by tenants
• Service charges
• Lease premiums (sometimes spread over years)
Income is taxable whether the property is:
Allowable Expenses for Landlords
• Furnished or unfurnished
• Owned personally or jointly
You can deduct expenses that are wholly and exclusively for renting out the property.
Common Allowable Costs
Repairs vs Improvements (Very Important)
• Letting agent fees
• Property management fees
• Accountant fees
• Advertising for tenants
• Landlord insurance
• Ground rent and service charges
• Council tax (if paid by you)
• Utility bills (if you pay them)
• Legal fees for short leases (under 50 years)
This is one of the most common problem areas.
Repairs (Allowable)
Improvements (Not Immediately Allowable)
• Fixing a broken boiler
• Repainting walls
• Replacing like-for-like items
• Roof repairs
• Electrical or plumbing fixes
• Extensions
• Loft conversions
• Upgrading to a significantly higher standard
Improvements are usually added to the capital gains calculation instead.
Replacement of Domestic Items Relief
If the property is furnished, you can claim for:
• Beds, sofas, wardrobes
• White goods
• Carpets and curtains
• Crockery and cutlery (for furnished lets)
You claim the cost of replacement, not the original purchase.
Mortgage Interest Relief (Restricted)Landlords can no longer deduct mortgage interest in full.
Instead:
Higher-rate landlords are often caught out by this, as taxable profit can appear higher than cash profit.
• You receive a 20% tax credit on mortgage interest
• This applies regardless of your tax band
Wear and Tear Allowance (Abolished)
The old 10% wear-and-tear allowance no longer exists.
You must now claim actual replacement costs under the replacement of domestic items rules.
Jointly Owned Property
If you own property jointly:
When and How to Pay Tax
HMRC expects accurate records and consistent treatment year to year.
• Income is normally split 50/50 between spouses
• You can change this with a Form 17 declaration if ownership differs
• Must match actual ownership shares
• Rental income is reported through Self Assessment
• Tax year runs from 6 April to 5 April
• Filing deadline: 31 January following the tax year
• Payments on account may apply
What HMRC Commonly Challenges
HMRC often investigates landlords who:
Poor record-keeping is a major trigger.
• Claim personal expenses as rental costs
• Treat improvements as repairs
• Claim 100% of mixed-use expenses
• Omit rental income
• Inconsistently apply expense rules
Simple, Safe Landlord Tax Approach
To stay compliant and reduce stress:
• Keep all receipts and invoices
• Separate personal and rental finances
• Be conservative where rules are unclear
• Use an accountant if you own multiple properties
• Review your tax position annually