Tax relief options for landlords

Taxes. They’re not the most exciting part of being a landlord, but they’re unavoidable. Whether you’re renting out a single flat or juggling a portfolio, getting your tax strategy right can make a huge difference to your profits and peace of mind.

The UK tax system can be complicated, especially when you have multiple sources of income – as many landlords and property investors tend to. Many end up overpaying or overlooking valuable reliefs simply because they don’t know what’s available. The good news is there are plenty of ways to lighten the load if you know where to look.

Consider this. Are you claiming all the allowable expenses you’re entitled to? Do you know the benefits of direct ownership versus a limited company? Are you aware of mortgage interest relief? These small reliefs and allowances can add up to big savings.

Here’s where we step in. With years of experience in Property Tax planning, we’ve created this easy-to-follow guide to help landlords like you take control. We share a recap on your basic tax obligations as a landlord, highlight the key reliefs (like Rent a Room Relief and capital gains exemptions) and share a summary table for you to review.

Understanding landlord tax obligations

Before we go any further, let’s review the tax obligations of a landlord.

If you own the property directly, through a joint venture, or partnership

If you own your rental property directly (i.e. in your name rather than through a company) then the following taxes can apply:

1. Income Tax: Payable at your applicable rate on the profit from rental income.
2. Capital Gains Tax (CGT): Levied if you profit upon selling your property.
3. Inheritance Tax (IHT): Properties form part of your estate, potentially affecting the tax paid by your beneficiaries.
4. Stamp Duty Land Tax (SDLT): Paid upon purchasing a residential property.

If you own the property through a limited company

If you have created a limited company to purchase and hold your rental properties, then different tax rules apply. There is no Income Tax on rental income, and there is no CGT on the disposal (sale) of assets held by a company.

Instead, Corporation Tax is payable on all profits made by a company – regardless of whether it’s rental income or a sale. As of 2025, the main rate is currently 25%, although that drops to 19% if you only manage a small portfolio with profits of less than £50,000 per year.

That means you can make a serious saving compared to the higher (40%) and additional (45%) rates of Income Tax. Keep in mind that you will be liable for tax when you extract profits from the company to your personal account – usually through a salary or dividends. IHT still applies as a company will form part of your estate upon passing away. SDLT also applies and companies actually pay a higher rate of SDLT compared to individuals as there’s a 5% surcharge on top of the standard rate. Learn more about Stamp Duty in our guide.

Key tax reliefs and allowances for landlords

Fortunately, there are a number of allowances and tax reliefs for landlords and property investors – to help reduce their liability. We’ll explain all of your options below.

Property Allowance

Did you know that you can earn up to £1,000 in rental income tax-free each tax year under the Property Allowance? If your gross rental income is below this threshold, you don’t need to declare it to HM Revenue and Customs (HMRC). However, you cannot claim other allowable expenses. Of course, the Property Allowance falls well below what most landlords will earn from rent. But it’s useful to know, especially if it was only a temporary rental for example.

Rent A Room Relief

Some people will opt to rent out a portion of their home to make some extra money – for example, getting a lodger for a spare bedroom. This is totally acceptable in the UK (although you may want to check with your mortgage provider and home insurance company first), but it technically makes you a resident landlord. That means you assume certain rights and responsibilities, including keeping the property in a good state of repair.

The bonus is that there’s a tax relief for landlords who earn rental income from their main home. The Rent A Room Scheme allows you to earn up to £7,500 per year tax-free.

Allowable Expenses

The government allows landlords to deduct certain expenses, which can lighten the tax burden. Allowable expenses include:

• Legal and professional fees (e.g. for accountants and letting agents).
• Buildings and contents insurance.
• Maintenance and repairs to the property (excluding improvements).
• Utility bills and Council Tax, if you pay for them.
• Rent, ground rent, and service charges.
• Services such as cleaning or gardening, if you pay for them.
• Costs of letting the property, like phone calls, stationery, and advertising.

If you’re wondering whether capital improvements (e.g. an extension or loft conversion) is an allowable expense, then the answer is no. However, they may qualify for CGT relief when selling the property.

Replacement of Domestic Items Relief

Over time, it’s a certainty that everyday household items will break or wear down beyond the point of repair. As a landlord, you can replace these items and expense the cost against your tax bill. This applies to domestic items such as furniture, furnishings, appliances, and kitchenware. However, the relief applies only to replacing items with a like-for-like or equivalent quality item, and not upgrades.

Mortgage Interest Relief

If you purchase a property using a mortgage product, there is also tax relief available on the interest payments. Unfortunately, the relief system is not as beneficial as it once was. As of April 2020, landlords who directly own residential properties can now only claim tax relief on mortgage interest and other finance costs at the basic rate (20%). You can learn more about the changes here.

Regardless, there is still relief available. For example, if your mortgage interest payments total £10,000 for the year you can claim a 20% tax relief on these payments.

Relief = £10,000 × 20% = £2,000.

This amount is taken off your Income Tax bill.

It’s worth noting here that if you own property via a limited company, you can still deduct the full cost of mortgage interest payments as a business expense (thus reducing Corporation Tax). Choosing an ownership structure is, therefore, really important.

Capital Gains Tax (CGT) Reliefs

Thinking of selling your rental property? Perhaps it’s time to retire and you want to cash in, or you simply want to free up funds for other investments. Regardless, your CGT liability may be quite large if you sell the property for more than you bought it.

However, there are allowances and reliefs that can help:

• Annual Exempt Amount: Everyone has an annual tax-free CGT allowance (£3,000 for the 2024/25 tax year). Anything above the allowance is taxed at your normal rate, but bear in mind that a large windfall from a property sale could push you into a higher tax band.
• Private Residence Relief: If the property was your main home at any point, you might qualify for tax relief on the period you lived there.
• Letting Relief: This is available if the property was your main home and you let part of it out; however, this relief has been restricted in recent years.
• Improvements: The cost of certain improvement works can be claimed against CGT. For example, if you added a kitchen extension to the property, the cost can reduce the size of your calculated gain for CGT.
• Allowable Expenses: Selling your rental property comes with a set of allowable expenses for CGT purposes. In short, this allows you to deduct the costs of acquisition and disposal (e.g. legal fees, estate agent fees, stamp duty) against your gains.

Capital Allowances

If you’re the landlord of a commercial building, you may be able to claim capital allowances on certain purchases and expenses.

There are different types of capital allowances, such as the Annual Investment Allowance (AIA), which lets businesses claim up to £1 million in costs each year, and the Structures and Buildings Allowance (SBA), which covers construction or renovation of non-residential properties. Businesses can also claim allowances on assets over time through the Writing Down Allowance (WDA). To benefit, businesses must track expenses carefully and ensure the assets qualify for these allowances.

Capital allowances are wide-ranging and complex. If you think they might apply to you, we recommend getting in touch with one of our property advisers for tailored advice.

Summary table

Next steps

If you’re a landlord with a portfolio of rental properties, professional support that you can trust is invaluable (and can be expensed!). It doesn’t matter if you’re renting out a room in your home or running a property investment empire, understanding your tax obligations and available reliefs can save you thousands.

If you would like to learn more, then have a read of the next article in this series where we share seven useful tax tips for landlords and property investors!