by Rajiv Singh, 09-11-2022

5 Ways To Reduce Tax Of The Landlord’s Income From Rental Property

There exists incredible opportunities to yield high rental incomes for landlords within the United Kingdom. However, one would not want huge tax rates to chew off considerable portions of the fruits of their rental property investments. There are many buy-to-let allowable expenses that you might not know but can claim to scale down your tax outflows.

Five fantastic tax saving tips for landlord’s earning income from rental property!

The taxation domain can be befuddling for many, but some wise recommendations from experts are surely worth a try. Due management of our rental accounts and landlord costs can go a long way in optimising our tax obligations. If you are a landlord seeking handy ways to lower your taxes, we have the top 5 ways to reduce your tax liabilities.

1) Avail of all rental income deductible expenses

As property owners, there are various spendings that make up buy-to-let allowable expenses and help lower our landlord costs in the form of taxes. You must not miss out on claiming deductible expenses that you incur during a given tax period to dilute the impact of income tax. It is critical to note that only those outlays that are entirely and exclusively attributable to the buy-to-let property are eligible for deduction in the rental accounts.

The most common buy-to-let allowable expenses that landlords can claim encompass the following:

  • Rental management agent fees
  • Legal and accounting charges
  • Landlord insurance costs
  • Property advertising expenses
  • Property repairs, cleaning, and maintenance charges incurred
  • Ground rent and council taxes
  • Administrative landlord costs
  • Labour cost for employees or contractors hired for services like cleaning or plumbing

Landlords should also be wary of the spends that they undertake during the initial acquisition of the rental property. Only revenue expenditures qualify for deduction from gross rental income. Thus, the costs connected to the purchase of the buy-to-let cannot be adjusted against any eventual rental income. Such expenses include legal charges, stamp duty, and building survey fees. These expenditures are summed together with the purchase price.

Similarly, the landlord costs related to renovation of the rental property, that are capital expenses by nature, cannot be deducted as regular costs against the buy-to-let earnings.

2) Acquire rental property in a joint ownership

Given the skyrocketing prices of real estate properties, making a buy-to-let purchase singlehandely can be strenuous for many. You can elect to invest in a rental property along with another individual as a partner. It will help you share the burden of a lot of landlord costs along with the applicable taxes. Under a joint ownership, there is a possibility to allocate the rental earnings proportionately in accordance to a predefined sharing ratio. Thus, partners can also plan to distribute their rental income in a manner beneficial from the tax saving perspective.

3) Leverage your buy-to-let property mortgage

Borrowing a loan does comes with the perks of offsetting your tax liabilities. The income tax regulations permit taxpayers in the UK to claim the amount of interest related to the buy-to-let mortgage as a deduction. One is qualifiable to deduct interest on loans for purchase of property as well as undertaking renovations or improvements in the buy-to-let. It is necessary to understand that the interest deduction is available for corporate deductions and not for those engaged in the financing business.

4) Establish a limited company

If considering your overall personal income you fall in the high tax bracket, you can contemplate setting up a limited company to handle your rental properties. It is a great tactic to tax your income as per corporate tax rates than the individual tax rates if your overall income is large. It is important to note that the rental property shall be held in the name of the company you incorporate. You can draw a defined payment as salary from the company for your individual needs. Maintaining the compliances of a limited company can be tricky. Hence, you should make an informed decision about setting up a limited company after weighing the landlord costs involved in comparison to the overall earnings.

5) Make the most of all available tax bands and carry forward losses if any

According to the income tax laws in the UK, your rental income is taxable after summation with other incomes as per the applicable tax band. You need to your other income along with your rental earnings and deduct eligible expenses to find your taxable income. If you have a partner whose overall income falls in a lower tax band, you can transfer the property in the name of your spouse. You must also ensure that you maintain utmost accuracy while calculating your buy-to-let allowable expenses and losses that are permissible to be brought forward and adjusted against your current income as well as those losses that can be carried forward to the succeeding year.

Bottom Line

There are various ways for landlords in the UK to optimize their taxes on rental receipts. Depending on your personal circumstances and available resources, you can make use of the relevant strategies. It is essential to go for tax planning well in advance to adopt useful strategies. You can consult property tax professionals to manage your rental accounts and regulate your relevant tax liabilities. Stay tuned for more such resourceful information!

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About Rajiv Singh

A Chartered Accountant in UK with 15+ years of experience in FinTech Consulting, Accounting & International Taxation. I enjoy being a Social, Foodie and Father of two young children, reachable at

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