Whether you're renting out a single flat or managing a portfolio of buy-to-let properties, understanding your tax obligations is essential. Property tax in the UK can be complex, especially with changing legislation, deductions, and rules affecting landlords. 

At East London Accountants, we support landlords across London and the UK with clear, reliable tax advice. Here’s everything you need to know to stay compliant and tax-efficient as a property owner. 

Do Landlords Pay Tax on Rental Income? 

Yes. Landlords must pay tax on the profits they make from renting out property. This applies whether the property is residential, commercial, furnished, or unfurnished. 

You’ll need to: 

• Declare rental income on a Self-Assessment tax return (SA100) 
• Pay Income Tax on your profit (after allowable expenses) 
• Keep detailed records of income and costs 

Allowable Expenses for Landlords 

You can deduct many costs from your rental income, including: 

• Letting agent fees 
• Property maintenance and repairs 
• Council tax and utility bills (if paid by you) 
• Landlord insurance 
• Accountancy fees 
• Ground rent and service charges 
• Direct costs (e.g. advertising, phone calls, travel) 

These expenses must be wholly and exclusively for the purpose of renting out your property. 

What About Mortgage Interest? 

Since April 2020, you can no longer deduct full mortgage interest as an expense. Instead, landlords receive a 20% tax credit on mortgage interest payments. 

This change has impacted the profitability of higher-rate taxpayers. Many landlords now choose to incorporate (create a limited company) for better tax treatment. 

Tax Bands and Rates 

Rental income is added to your overall income and taxed as follows: 

• Basic rate (20%) – up to £50,270 
• Higher rate (40%) – £50,271 to £125,140 
• Additional rate (45%) – over £125,140 

Use your Personal Allowance (£12,570 in most cases) to reduce your tax liability. 

Capital Gains Tax (CGT) 

You may pay CGT when selling a rental property that has increased in value. Key points: 

• Tax-free allowance: £3,000 (2024/25) 
• Rates: 18% for basic rate taxpayers, 24% for higher/additional rate 
• Must report and pay CGT within 60 days of sale 

Allowable deductions: 

• Stamp Duty and legal fees 
• Estate agent and solicitor costs 
• Home improvements (not repairs) 

Stamp Duty Land Tax (SDLT) 

If buying additional properties, landlords must pay a 3% surcharge on top of standard Stamp Duty rates. 

Example: 

• Property price: £300,000 
• SDLT (with surcharge): approx. £11,500 

Always factor SDLT into your financial planning. 

Making Tax Digital (MTD) for Landlords 

From April 2026, landlords earning over £50,000 annually must: 

• Keep digital records 
• Submit quarterly updates to HMRC via approved software 

This applies to both sole traders and landlords. MTD for those earning £30,000–£50,000 follows in April 2027. 

We recommend moving to cloud software (e.g. Xero or QuickBooks) well in advance. 

When Should You Incorporate? 

Running a property business through a limited company offers: 

• Corporation Tax on profits (currently 19–25%) instead of Income Tax 
• More tax-efficient mortgage interest relief 
• Flexibility with profit extraction (dividends, salary) 

However, it comes with: 

• More admin and costs 
• No CGT allowance on property sales 
• Stamp Duty on property transfers 

We can advise if incorporation is right for your situation. 

How East London Accountants Can Help Landlords 

Our property tax services include: 

• Annual tax returns and digital record-keeping 
• CGT calculations and declarations 
• Tax planning for single or portfolio landlords 
• Advice on incorporation and restructuring 
• Full support for MTD compliance 

With over 20 years of experience and property tax expertise, we simplify landlord accounting and help maximise your profits. 

Book a Free Landlord Tax Consultation 

Don’t let tax rules catch you off guard. Book your free consultation with East London Accountants and get expert advice tailored to your property income, tax position, and long-term plans.