Tax and accounting for UK landlords — the basics

Rental income is treated as untaxed income for Self Assessment purposes. You declare it on a return (form SA105 for property income) by 31 October on paper or 31 January online for the previous tax year ending 5 April. It stacks on top of your salary, pension, and any other taxable income. If you're an employed basic-rate taxpayer earning £40,000 and the property nets £8,000 a year, you pay 20% on the first £10,270 of that (taking you to the £50,270 higher-rate threshold) and 40% on whatever spills over. For most accidental landlords with one property, the property is taxed mostly at basic rate; for landlords with three or four properties or strong employment income, much of the profit is taxed at 40%. If your gross rental income is under £1,000 a year you can use the Property Allowance and don't need to declare it. Above that, you must register for Self Assessment by 5 October following the end of the tax year in which you first received rent. From April 2026, Making Tax Digital for Income Tax applies to landlords with property income over £50,000 — quarterly digital submissions through compatible software. The £30,000 threshold follows in April 2027, and £20,000 in April 2028. [VERIFY: MTD ITSA thresholds and dates — confirm against latest HMRC announcement before publication.]

The rule that decides what comes off your rental profit before tax is one of HMRC's clearer ones: the expense has to be wholly and exclusively for the letting business, and it has to restore the property rather than improve it. In practice, the routine deductions are the obvious ones. Letting agent and management fees come off in full, including any VAT charged on them. Repairs and maintenance come off — but only where you're replacing like for like, not upgrading. A new boiler replacing a broken one of the same type is allowable; a heat pump installed because you wanted to modernise the heating system isn't. Buildings and landlord insurance both come off, as do service charges, ground rent, and any leasehold administration fees. Council tax during void periods is deductible (council tax during occupied periods is the tenant's bill, not yours). Accountancy and bookkeeping fees, marketing and tenant-find costs, and travel to the property for genuine management visits — at HMRC's published rate of 45p per mile for the first 10,000 business miles — all sit on the allowable side too. Furnishings and white goods get separate treatment under Replacement of Domestic Items relief. The relief covers like-for-like replacements of sofas, beds, white goods, and carpets, but it doesn't cover the first purchase. So if you furnish a property from scratch you can't deduct that initial spend; if you replace the dishwasher in year three, you can. On the not-allowable side, the big one is capital expenditure. Extensions, kitchen or bathroom replacements that exceed like-for-like, conservatories — anything that improves rather than restores — goes into the CGT base cost for when you eventually sell, rather than coming off rental profit now. Mortgage capital repayments aren't allowable either; only mortgage interest is dealt with, and that has its own treatment under Section 24, covered in the next section. Personal travel or living costs are out. Keep contemporaneous receipts for everything you intend to claim. HMRC's six-year retention requirement starts from the 31 January submission deadline, not from the date of the expense itself.

Section 24 of the Finance (No. 2) Act 2015 — phased in between 2017 and 2020 and fully in force since the 2020/21 tax year — replaced the old mortgage-interest deduction with a 20% basic-rate tax credit. What it means in practice: your mortgage interest is no longer subtracted from rental profit before tax is calculated. Instead, you pay tax on the gross profit (rent minus everything except mortgage interest) and then receive a tax credit worth 20% of the mortgage interest at the end of the calculation. For a basic-rate taxpayer the new system gives the same answer as the old one. For a higher-rate taxpayer it's materially worse — you're now paying 40% tax on the interest portion of your rent and only getting 20% relief back. On a heavily-mortgaged BTL this can mean paying tax on a notional profit even when actual cash flow is zero or negative. Section 24 doesn't apply to properties held in a limited company — companies still deduct mortgage interest in full from rental profit before Corporation Tax (25% on profits over £250,000, with marginal relief between £50,000 and £250,000). It also doesn't apply to commercial property. The Furnished Holiday Lets regime, which previously sat outside Section 24, was abolished from April 2025. This is the single biggest reason landlords incorporate. It's also the reason incorporation is rarely a clear win — moving an existing portfolio into a company triggers CGT on the gain and Stamp Duty on the transfer in. Whether to incorporate is a £500-of-accountancy-fees question that always pays for itself.

CGT is charged on disposal — sale, gift to someone other than a spouse, or transfer into a limited company you control. The gain is the proceeds minus the original purchase price, minus acquisition costs (legal, survey, stamp duty), minus any capital improvements (extensions, new kitchens that exceed like-for-like), minus disposal costs (estate agent fees, legals). Residential CGT rates from October 2024 are 18% within the basic-rate band and 24% above it (down from 28% pre-October 2024). The annual exempt amount is £3,000 for 2025/26 and 2026/27. Private Residence Relief (PRR) applies for any period the property was your only or main home — proportionate to the months of ownership. The final 9 months of ownership are always eligible for PRR if you ever lived there, regardless of whether you were actually living there at the end. Lettings Relief was substantially curtailed in 2020 and now only applies to shared occupation with the tenant. The reporting deadline is 60 days from completion. You file a UK Property Disposal Return online via HMRC and pay any tax due within the same window. The 60-day deadline is separate from your Self Assessment — late returns attract penalties even if you have no tax to pay. If you've held the property a long time and most of the gain accrued years ago, the calculation can be substantial. Plan disposals around your other income (lower-income years are better) and around any unused annual exempt amount for both you and a spouse — joint ownership often halves the bill.

If you have one rental property on Self Assessment, no mortgage-interest restriction issues (basic-rate taxpayer, low loan-to-value), and straightforward expenses — probably not. HMRC's free SA105 form and an hour with the gov.uk landlord guidance does the job, and many one-property landlords do this themselves for years without problems. If any of the following apply, you almost certainly should: you're a higher- or additional-rate taxpayer with a mortgaged BTL (Section 24 alone makes the calculation finicky, and the cost of getting it wrong exceeds the cost of an accountant); you have more than one property; you're considering incorporation (this is a one-off conversation, not a recurring fee — £500–£800 of accountancy on the right side of a £20,000 stamp-duty bill is good value); you own the property jointly with a spouse and want to optimise the income split for tax (Form 17 elections for unequal beneficial ownership are simple but easy to get wrong); or you have a capital gain coming up (the 60-day reporting clock starts at completion; a pre-completion conversation with an accountant is worth more than a post-completion one). A property-specialist accountant in our area typically charges £350–£550 a year for a Self Assessment return covering up to three properties. The NRLA maintains a list of vetted property accountants; ask for two or three quotes and pick the one that responds quickly — responsiveness during HMRC enquiries matters as much as the fee. This guide is general information, not personalised advice. Speak to a chartered accountant before making any decision that costs more than their fee.