UK: Tax Tips For Buy-To-Let Landlords

Last Updated: 16 September 2009
Article by Geoff Everett

The primary tax concerns for property owners include income tax, loss relief, CGT and deductible expenses.

Income Tax

Interest on loans to acquire, refurbish, or improve let properties is an allowable deduction against the rental income. Landlords acquiring new properties and those with existing properties should consider the tax benefits of loan finance (if available) compared to using their own capital funds.

A landlord who uses his/her own funds to wholly or partly finance the purchase of a let property may wish to release capital. A loan secured on the property should qualify for interest relief. However, that relief will be limited to the interest that would be payable on a loan figure equivalent to the capital contributed to the rental business. This principle will apply to a property that a landlord introduces to his/her letting business e.g. a former main residence.

In view of the Finance Act 2009 changes to the treatment of furnished holiday lettings and the extension of this treatment to properties located in the European Economic Area (EEA) until April 2010, it may be appropriate to review whether properties you hold in this region qualify for the regime. This may be useful where losses have been incurred and there is income available from other sources against which to set those losses.

Joint Ownership

There are important property law implications where property is held jointly which should always be taken into account.

Depending on the tax profile of the parties, it may or may not be desirable, from a tax point of view, for property to be owned jointly. Where property generating rental profits is held jointly there is the possibility to use two sets of income tax personal allowances, and basic rate bands.

However, with the removal of the personal allowance from 6 April 2010 for those with income over £100,000, and the new 50% tax rate for those with income over £150,000, sole ownership may now be preferential where one spouse/civil partner is within these rules and the other is not, even if the lower earning spouse is a 40% taxpayer.

On the sale of the property there is also the opportunity to use two capital gains tax (CGT) annual exemptions. Where there are joint owners, CGT letting relief is potentially available to each owner. Letting relief is discussed in brief elsewhere in this article.

There are inheritance tax implications where property is owned jointly and also special rules for spouses/civil partners who let property owned jointly which should be considered.


Property, including the family home, is a chargeable asset for CGT purposes. There is, however, a specific CGT provision to exempt from tax gains or losses on the only or principal residence of a typical individual. These provisions mean that on a standard residence where the whole of the property has been used throughout the period (or until the last three years) of ownership as the individual's main home there is generally no tax to pay on any gain realised on the sale.

The rules can be complex and where there are multiple residences or letting is involved, individuals should seek specialist advice.

There is the potential to claim a significant amount of relief where a property which has been let out as residential accommodation was, or becomes, the principal residence of the landlord.

In broad terms, the maximum relief an individual can claim under this heading is a deduction from the chargeable gain equal to the lower of either £40,000 or the gain attributed to the letting period(s). A letting relief claim is in addition to the private residence relief attributable.

Neither private residence relief nor letting relief can turn a gain into a loss. The reliefs will only restrict the gain to nil.

With respect to the Finance Act 2009 announcements on furnished holiday letting properties, there are a number of CGT factors that should be considered before the advantages of this regime are removed in April 2010. For example: selling the property before April 2010 may give access to entrepreneur's relief (an effective CGT rate of 10% instead of 18%), which may not be available for a sale after that date. If a qualifying furnished holiday letting property located in an EEA country was sold prior to 5 April 2008 then business asset taper relief may have applied (potentially significantly reducing the rate of CGT applicable); it may therefore be worthwhile considering whether an amended claim can be made for this relief.


Private and corporate landlords can claim the costs of buying and installing specific energy-saving items (loft, cavity wall, solid wall and floor insulation, as well as hot water systems and draught proofing) in residential properties they rent out, as 100% deductions against their taxable profits. Landlords can claim tax relief on up to £1,500 of expenditure for each dwelling house (including each residential flat within a block of flats).

However, landlords can't claim the Landlords Energy Savings Allowance (LESA) for properties where they are already claiming an allowance under the rent-a-room scheme, or for properties rented out as furnished holiday accommodation, or if the energy saving item is installed in a property during the course of construction.

To claim the allowance landlords must have a relevant interest, and there are certain other restrictions on the timing of expenditure which qualifies for LESA.

Top Tax Tips

  1. For property rental losses generated by capital allowances, consider loss relief against income or profits from other sources.
  2. Where several properties are rented out in the same tax year, offset the loss from a loss-making property against the profit from a profit-making property.
  3. For jointly held profitable lettings, consider whether joint ownership is now efficient for income tax purposes where one party to the 'marriage' has total income of over £100,000.
  4. Review payments on account of tax liabilities to see whether a reduction is appropriate.
  5. Offset the interest you pay on your buy-to-let mortgage against rental income to reduce the amount of tax you pay. Check to see if there is scope to reorganise total borrowings to increase tax relief.
  6. Claim tax relief on appropriate expenses such as repairs (not improvement expenditure), insurance and letting agency fees. Where a property is furnished you can currently either claim a wear and tear allowance or a deduction against income for replacing furniture and equipment.
  7. Offset your accumulated UK rental losses against future UK rental profits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions