Landlord tax: the working basics
Rental profit is taxable income, and the rules reward landlords who keep clean records from month one. The essentials for an individual landlord in England, as orientation rather than tax advice:
What is taxed
Rent received minus allowable expenses, taxed at your marginal income tax rate through self assessment. Register with HMRC once rental income starts; the property allowance exempts only trivial amounts.
Allowable expenses
- Repairs and maintenance, but not improvements: fixing the roof is deductible, adding an extension is capital.
- Agent fees, insurance, safety certificates, accountancy and ground rent.
- Replacement of domestic items relief: like-for-like replacement of furnishings and appliances you provide.
Mortgage interest: the credit, not the deduction
Individual landlords no longer deduct finance costs from profits. Instead a basic-rate tax credit of 20% of the interest applies, which is why higher-rate taxpayers feel mortgage interest so keenly and why some hold property through companies. That structural choice needs proper advice: it changes capital gains, stamp duty and financing, not just income tax.
Making Tax Digital
Making Tax Digital for Income Tax brings quarterly digital reporting for landlords above the income threshold, phasing in from April 2026 onwards. Software-kept records stop being optional at that point; starting the habit early costs nothing.
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Start my agreement →Frequently asked questions
Can landlords still deduct mortgage interest?
Not as an expense. Individuals receive a 20% basic-rate tax credit on finance costs instead, whatever their tax band. Companies deduct interest under different rules.
Is a new kitchen tax deductible?
A like-for-like replacement leans toward repair and deductibility; an upgrade in kind leans capital. Keep invoices detailed and take advice on the boundary.