Wednesday, 19th February, 2025
As a landlord, staying on top of your tax obligations is crucial to maximising your rental income while remaining compliant with HMRC regulations. With tax laws evolving each year, here are some key tax tips for landlords in 2025 to help you stay financially efficient and avoid potential pitfalls.
Keep Detailed Records of Income & Expenses
Accurate record-keeping is essential for filing correct tax returns and claiming all eligible deductions. Ensure you track all rental income, property-related expenses, mortgage interest, maintenance costs, and service charges.
Understand Mortgage Interest Tax Relief Changes
Since the changes introduced in previous years, landlords can no longer deduct mortgage interest as an expense. Instead, you receive a 20% tax credit. Ensure you're accounting for this when calculating your rental profits and tax liabilities.
Maximise Allowable Deductions
Landlords can claim several expenses to reduce taxable profits, including:
- Letting agent fees
- Maintenance and repairs (not improvements)
- Council tax and utility bills (if paid by the landlord)
- Insurance costs (landlord insurance, buildings, and contents cover)
- Professional fees (accountants, solicitors, etc.)
Be Aware of Capital Gains Tax (CGT)
If you sell a rental property in 2025, you may be subject to Capital Gains Tax. Currently, basic-rate taxpayers pay 18%, and higher-rate taxpayers pay 28% on gains above the annual exemption threshold. Consider tax-efficient strategies like Private Residence Relief (if applicable) or offsetting losses from other properties.
Make Use of the Property Income Allowance
Landlords earning under £1,000 in rental income annually can benefit from the Property Income Allowance, meaning no tax return is needed. if you earn more, you can still claim the allowance instead of deducting expenses if it's more beneficial.
Consider Incorporating Your Property Business
Some landlords opt to transfer properties into a limited company to take advantage of lower corporation tax rates (currently 25%). However, transferring property can trigger Stamp Duty Tax (SDLT) and Capital Gains Tax (CGT), so professional advice is recommended before making this decision.
Stay Compliant with Making Tax Digital (MTD)
From April 2026, Making Tax Digital (MTD) for Income Tax Self-Assessment will require landlords earning over £50,000, to submit quarterly digital tax updates. While this is a year away, preparing now by adopting digital accounting software will make compliance easier.
Plan for Inheritance Tax (IHT)
If you're passing down rental properties, Inheritance Tax (IHT) planning is crucial. Properties above the £325,000 threshold may be subject to 40% tax. Seeking financial advice on trusts or gifting strategies can help reduce tax burdens.
Check VAT Implications for Short-Term Rentals
If you provide short-term holiday lets, your rental income may be subject to Value Added Tax (VAT) if it exceeds the £90,000 threshold in 2025. Review your rental structure to determine whether VAT registration is required.
Seek Professional Tax Advice
Tax laws for landlords are constantly evolving, and staying compliant while maximising savings can be complex. Consulting an experienced accountant ensures you remain on top of changes and optimise your tax position.
Let Pro Tax Plus Accountants Help You! At Pro Tax Plus Accountants, we specialise in landlord tax services, helping you navigate tax regulations, maximise deductions, and stay compliant with HMR. Get in touch with us today to discuss how we can support your property business!
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