Maximising Tax Efficiency as a UK Landlord

With Section 24 now fully phased in, tax planning is more important than ever. Here's what you can (and should) be claiming.

Allowable Expenses

100% Deductible:

• Letting agent fees
• Legal fees for short leases or tenant disputes
• Accountant fees
• Insurance (landlord, buildings, rent guarantee)
• Ground rent and service charges
• Council tax (during void periods)
• Utility bills (if you pay them)
• Cleaning and gardening services
• Property maintenance and repairs

Capital Allowances (Furnished Properties):

• 10% wear and tear (simplified)
• OR actual replacement cost of furnishings

The Mortgage Interest Trap

Since April 2020, you can only claim a 20% tax credit on mortgage interest, not a deduction from income. This affects higher-rate taxpayers significantly.

Example:

• Rental income: £15,000
• Mortgage interest: £8,000
• Other expenses: £3,000
• Taxable income: £12,000 (not £4,000!)
• Tax credit: £8,000 × 20% = £1,600

Limited Company Consideration

For new purchases or large portfolios, a limited company structure may be more tax-efficient:

Pros:

• Mortgage interest fully deductible
• Corporation tax (25%) vs. income tax (40-45%)
• Easier to pass to family

Cons:

• Higher mortgage rates
• CGT on transfer of existing properties
• Additional admin and accounting costs

Often Missed Deductions

1. Mileage to properties - 45p per mile for first 10,000 miles
2. Home office costs - If you manage properties from home
3. Training courses - Property management, tax, compliance
4. Professional subscriptions - NRLA, landlord associations
5. Bad debts - Rent owed but irrecoverable

Year-End Actions

Before 5th April:

• Review all expense receipts
• Calculate mileage log
• Confirm mortgage interest statements
• Consider pension contributions to reduce tax band