Understanding Taxation for Landlords in the UK

Taxation is one of the most critical—and misunderstood—aspects of property investment. Without proper planning, landlords can lose thousands each year in avoidable tax liabilities. With ongoing legislative changes, understanding your obligations and opportunities is now essential to protecting your rental income.

At Index Property, we simplify landlord taxation and show you how to legally reduce your tax bill while staying fully compliant with HMRC.

Key Taxes Every Landlord Needs to Know

Whether you’re a first-time investor or managing a large portfolio, you’ll likely encounter these five core taxes:

1. Income Tax
   Rental profits are subject to income tax at your marginal rate (20%, 40%, or 45%). You must declare all rental income, minus allowable expenses, through Self Assessment.

2. Section 24 Mortgage Interest Relief Restriction
   Since 2020, landlords can no longer deduct mortgage interest from rental income. Instead, you receive a basic-rate tax credit (20%), which has a major impact on higher-rate taxpayers.

3. Capital Gains Tax (CGT)
   When selling a buy-to-let property, CGT applies to the profit made after your annual allowance. Rates are 18% (basic rate) or 24% (higher rate for residential property).

4. Stamp Duty Land Tax (SDLT)
   Buy-to-let purchases are subject to an additional 3% surcharge above standard SDLT rates.

5. Corporation Tax (if operating via a limited company)
   Rental profits within a limited company structure are taxed at 19% (or 25% for profits above £50,000), depending on company size.

Reducing Your Tax Bill—Legally and Efficiently

Smart landlords optimise their tax position using legitimate, HMRC-compliant strategies such as:

• Claiming all allowable expenses: repairs, insurance, letting agent fees, etc.

• Investing through a limited company for better tax treatment on profits and mortgage interest

• Using pension contributions and spouse ownership splits to reduce taxable income

• Timing sales to maximise CGT allowances

• Taking advantage of capital expenditure relief for improvements

We provide clear, practical guides tailored to different portfolio sizes and ownership structures.

Is a Limited Company Right for You?

Many landlords are now investing through limited companies to reclaim full mortgage interest relief and benefit from lower corporate tax rates. But it’s not always the best route—this page helps you assess:

• Setup and ongoing costs

• Tax on dividends vs salary

• Mortgage availability for limited companies

• Long-term exit planning and CGT impact

Avoid Common Tax Mistakes

The most frequent landlord tax errors include:

• Failing to declare rental income

• Claiming ineligible expenses

• Incorrect mortgage interest deductions

• Overlooking CGT liabilities after a sale

• Not using capital allowances

Our guides help you avoid penalties, interest charges, and red flags with HMRC.

Need Help With Tax Planning?

Use our Landlord Tax Strategy Tool to:

• Estimate your income tax liability

• Compare personal vs company tax treatment

• Forecast the tax impact of EPC upgrades or remortgaging

• Receive tailored tips for improving tax efficiency

Use our Tax Strategy Tool below

Conclusion

Tax is one of the few areas of property investment you can’t afford to ignore. By taking control of your tax position, you can significantly boost net profit, reduce risk, and operate like a true professional. Disclaimer – we cannot be held responsible for any errors or omissions on our calculation tools. They are for guidance only.