FAQs - Landlord tax relief

There have been a number of changes to the way landlords' income and profits are taxed in recent years. Here's our landlord's tax guide.

What is my Personal Allowance?

The amount you can earn before you start paying tax in £12,570, however, the Personal Allowance can increase annually to reflect inflation, in order to maintain the value of the allowance. It should be noted due to Covid, the Chancellor froze the Personal Allowance at the 2021/22 level until 2027/8 in last November’s Autumn Statement. This means that over the next few years, as the cost of living rises through inflation, the actual value of your tax-free allowance will continue to reduce.

Click here for HMRC details.

What is the Top rate tax threshold?

This is now £125,140. And earnings over that level will be taxed at 45p. So those earning over £150,000 will pay 5p more in tax on £24,861 and see their tax bill rise by £1,243.

What other taxes do I need to be aware of?

There's something called 'Dividend Allowance' If you receive dividend income from shares, the tax-free allowance will reduce from £2,000 to £1,000 for the 2023/24 tax year, and then to £500 for the 2024/25 tax year.

What about Capital Gains Tax?

If you’re planning to sell the property soon, allow for the CGT tax-free allowance to drop significantly over the next two tax years. For 2023/24 it’s reduced from £12,300 to £6,000.

In April 2024 to £3,000. So, for anyone with gains above the allowance, CGT will be payable on an additional £9,300 by the 2024/25 tax year.

Keep in mind you only have 60 days to report the gain to HMRC and pay the tax.  If you are selling make sure you make arrangements so that you don’t miss the deadline and get incur a penalty.

Click here for HMRC details.

What if you let via a limited company?

If you let your properties via a limited company and have annual profits of more than £50,000 Corporation Tax is 19%. Companies with profits of between £50,001 and £250,000 will be taxed at a graduated rate through marginal relief applied to the 25% rate.

Click here for HMRC details.

How can I make tax savings?

Expenses 
Claim your expenses. Expenses such as plumbing repairs, buildings insurance, and landlord’s insurance will be incurred as a landlord throughout a tax year, you may be able to offset these against your rental income to reduce your profits which are subject to tax. 

Loan interest relief restriction for Income Tax
Income Tax relief can be claimed on the interest you pay the bank on your mortgage to fund the purchase of the property.  You may be due to receive an income tax credit of 20% of the interest paid. Relief is claimed on your self-assessment tax return each year.

SDLT relief
If you are purchasing multiple properties together, Multiple Dwellings Relief which can help to reduce the SDLT due.

When purchasing property, consider whether to put it in your joint names, perhaps with a second person such as a spouse, civil partner, your children (where they are adults), or business partner. The profit is spread for income tax purposes. It may be that they have tax bands available to lower the overall income tax bill. 

Fri 02 Jun 2023