5 ways landlords can minimise their tax liability

5 ways landlords can minimise their tax liability
26th October 2023

When you own a rental property, you enter a world of taxation that can be very complicated! Over the last decade, tax changes have not been favourable for landlords, for instance:

  • The withdrawal of mortgage interest as an allowable expense
  • The introduction of an additional 3% purchase tax for investment properties in England, 4% in Wales and Scotland.
  • Capital gains tax being reduced for every asset class except property (which remains at 18% basic rate and 28% higher rate for property gains, versus 10% and 20% for gains from other investments)

As a landlord, you want to ensure your property business is as profitable as possible – and that means minimising your tax liability, so you don’t pay HMRC any more than you need to.

Here are five options that can help you do that:


  1. Take advice from an independent property tax specialist

Because property tax is a particularly tricky area, it’s important to take advice from a professional who is experienced in buy to let. So, even if you already have a trusted accountant, it’s worth consulting a specialist. They will be able to properly assess your income, expenditure and property-related costs, and help ensure you are investing and running your property business in the most tax-efficient way.

It’s also advisable to have a bookkeeper or accountant that’s used to working with landlords, who can make sure everything is properly recorded and accounted for on an ongoing basis.

  1. Explore whether it’s worth investing via a Limited Company

For some people, it’s better from a tax perspective to own and/or let property through a Limited Company, rather than as an individual. The benefits include:

  • Corporation tax is charged at a lower rate than income tax for those on higher and additional rates
  • Profits can be held in the company
  • There can be favourable tax rates when you come to sell the property or dispose of shares in the company, compared with CGT for individuals

However, this is something that’s not right for everyone, as it will depend on your other assets, business interests and earnings. It’s also important to bear in mind that having a company brings its own legal obligations and administrative requirements, all of which need to be considered.

We offer a Smart Investment service, powered by GetGround, where we can discuss if a limited company is right for you, and if so, help set it up and and run it on your behalf.


  1. If you have a partner or spouse, look at setting up a partnership

If you are both pay tax at the basic rate, it could be worth setting up a business partnership, where you share the rental profits and each pay tax on your share, however, do seek professional advice if you consider this option.

  1. Consider splitting ownership of the property

If you’re married, you could consider splitting ownership of the property (as tenants in common) to reduce your overall tax liability.

This can be particularly beneficial if one of you is a higher or additional rate tax payer and the other is either on a low income or not currently earning. For example, if the lower earner owns 80% and the higher earner 20%, you can then split the rental income 80/20 and pay a bigger proportion of tax at 20%, rather than 45% or 50%.

And when it comes to capital gains, each individual has an annual tax-free allowance – currently £6,000, although that is reducing to £3,000 from April 2024. So, if you split the ownership with your partner, when you come to sell, each person can deduct their allowance from their share of the gain, reducing the amount that’s liable to CGT. And then if the lower earner is responsible for the majority of the tax, as a couple you’ll be paying a greater proportion at 18% instead of 28%.

Importantly, before moving forward with any of the three points above, you should consult a property tax professional and/or a legal property investment specialist, who can give you bespoke advice.


  1. Keep all your receipts

It may sound obvious, but you can’t claim expenses if you don’t have receipts! Property investment expenses are divided into two main categories:

  • ‘Revenue’: costs incurred in the running of your rental business, e.g. professional fees, travel to and from your property, insurance, maintenance services and repairs. These can be deducted each year from rental income.
  • ‘Capital’: bigger expenses that enhance the property’s value, e.g. upgrading the kitchen or adding an extension. These are deducted from capital gains when you sell or dispose of the property.

Working out exactly what can legally be deducted and when can be complicated, but if you provide your bookkeeper or accountant with all your receipts, then can then help ensure you claim for everything you’re entitled to.

If you need any help finding a good local tax adviser or legal representative, just contact your local branch and we will be happy to give you some recommendations.

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