Buy-to-Let Tax UK: What Landlords Need to Know
Buy-to-let landlords face multiple tax obligations. Rental income is taxed at your marginal income tax rate (20%, 40%, or 45%). You can deduct allowable expenses including letting agent fees, insurance, maintenance, and ground rent — but not mortgage capital repayments.
Since April 2020, Section 24 means mortgage interest is no longer deductible as an expense. Instead, landlords receive a 20% tax credit on their interest payments. This significantly increases the tax burden for higher-rate taxpayers, as the full rental income is now included in taxable income.
When you sell, you pay CGT at residential rates (18% basic, 24% higher) on any gain. The 3% stamp duty surcharge applies when purchasing, and you must report and pay CGT on property disposals within 60 days of completion. Many landlords are now considering whether operating through a limited company is more tax-efficient.
Frequently Asked Questions
Should I buy through a limited company?
Companies pay corporation tax (25%) rather than income tax on rental profits, and mortgage interest remains fully deductible. However, transferring existing properties triggers CGT and stamp duty. It is often only worthwhile for new purchases or portfolio landlords.
What expenses can I claim?
Letting agent fees, insurance, maintenance and repairs (not improvements), accountancy fees, advertising for tenants, ground rent and service charges, council tax (if you pay it), and travel costs to the property.
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