Specialist Accountants for Landlords

The restriction on mortgage interest relief is the change that reshaped landlord taxation, and its effects are still surprising people. Finance costs are no longer deducted from rental profit; instead you receive a basic-rate tax reducer. The consequence for a geared higher-rate taxpayer is that your taxable profit can substantially exceed your actual cash profit, and in some cases you can owe tax on a property that made you nothing. That is the rule working as designed, not an error in the calculation.

Which is why the incorporation question comes up so often. Holding property in a company restores full relief for interest against profits and gives corporation tax rates rather than income tax rates. But transferring existing property to a company is a disposal for capital gains tax and a purchase for stamp duty, including the additional property surcharge, so there is a real and immediate cost to weigh against a future saving. For a heavily geared higher-rate taxpayer with a substantial portfolio it can be worth it. For two or three properties it very rarely is. We model it properly before anyone spends anything.

The distinction between a repair and an improvement decides whether a cost comes off this year's rental profit or waits until you sell to reduce a capital gain. Replacing something with the modern equivalent is generally a repair even if the new one is better, because you cannot buy 1970s windows any more. Adding something that was not there before is an improvement. The line is more generous than most landlords assume, and claiming correctly on both sides is worth real money.

Furnished holiday lettings were a separate and more favourable regime, with full interest relief, capital allowances and better capital gains treatment. That regime has been abolished, and short-term lets are now taxed broadly like any other property business. Anyone who bought on the strength of the old rules should look again at the numbers, because they have genuinely changed.

Selling a residential property brings a deadline that catches people out constantly. A disposal producing a gain must be reported to HMRC and the tax paid within sixty days of completion — a separate return from your self assessment, with penalties that start quickly. Private residence relief for any period you lived there, and lettings relief where it still applies, reduce the gain, but the sixty-day clock runs regardless. The time to ask is before exchange, not after completion.

Making Tax Digital for Income Tax now brings landlords above the income threshold into quarterly reporting from compatible software. For anyone with several properties this is a genuine change in routine rather than a formality, and it is much better arranged in advance than discovered at a deadline.

Ownership structure is worth settling early. Splitting beneficial ownership between spouses can move income to the lower taxpayer, but it needs the right paperwork and, where the split is unequal, a declaration to HMRC. Joint ownership, trusts and company structures all have consequences at sale and on death, and all are much easier to arrange at purchase than to rearrange later.