With You At Every Stage
Landlord Tax in the UK – What You Can Still Claim, and What HMRC Has Tightened.
Why Landlord Tax Still Causes Confusion
Landlord taxation in the UK has changed more in the last decade than most other areas of personal tax. Yet many landlords still operate on outdated assumptions, advice picked up years ago, or guidance passed on informally. HMRC does not actively correct these misunderstandings — it simply disallows claims when returns are reviewed or enquired into.
At Rothstone Accountants, we regularly see landlords paying either too much tax due to missed reliefs, or exposing themselves to unnecessary HMRC risk through incorrect claims. Understanding what you can still claim — and where HMRC has tightened the rules — is now essential.
Expenses Landlords Still Commonly Get Wrong
One of the most persistent problems is expense categorisation. Many landlords assume that if a cost relates to the property, it must be deductible. HMRC’s view is far narrower.
Commonly Misclaimed Expenses
| Expense Type | Common Belief | HMRC Reality |
|---|---|---|
| Capital improvements | Fully deductible | Capital only |
| Initial purchase costs | Revenue expense | Capitalised |
| Personal travel | Fully claimable | Restricted |
| Private phone usage | Allowable | Apportioned |
These errors often arise from well-intentioned but overly simplistic bookkeeping.
Mortgage Interest Relief – What Actually Applies Today
Mortgage interest relief is one of the most misunderstood areas of landlord taxation. For individual landlords, interest is no longer deducted from rental income. Instead, relief is given as a basic rate tax credit.
How Relief Works in Practice
| Ownership Type | Treatment |
|---|---|
| Individual landlord | 20% tax credit |
| Higher-rate taxpayer | Partial relief only |
| Limited company | Fully deductible |
This distinction is critical. Two landlords earning the same rental income can have very different tax outcomes depending purely on ownership structure.
Repairs vs Improvements – HMRC’s View
The difference between a repair and an improvement is not subjective. HMRC assesses whether the property is simply restored to its original condition, or whether it is enhanced beyond that point.
Practical Examples
| Cost | Treatment |
|---|---|
| Replacing broken boiler | Repair |
| Upgrading to higher-spec system | Improvement |
| Repainting damaged walls | Repair |
| Adding an extension | Capital |
Misclassifying improvements as repairs is a common trigger for HMRC enquiries.
Record-Keeping: Where HMRC Has Tightened
HMRC’s expectations around evidence have increased significantly. Bank statements alone are rarely sufficient.
Common issues flagged include:
-
Missing invoices
-
Poor descriptions of expenses
-
Inconsistent categorisation
-
Lack of digital records
Even genuine expenses can be disallowed if evidence is inadequate.
What’s Changed Recently
Recent developments include:
-
Increased focus on digital record accuracy
-
Greater scrutiny of multi-property landlords
-
Cross-checking rental income against third-party data
HMRC’s data-matching capabilities are far stronger than many landlords realise.
Planning Steps Landlords Should Consider
Landlord tax planning is no longer optional — it is essential.
Key considerations include:
-
Ownership structure review
-
Forward-looking tax projections
-
Expense categorisation audits
-
Long-term exit planning
At Rothstone Accountants, landlord tax is approached strategically, not reactively. We focus on protecting cashflow while staying firmly within HMRC’s rules.
Landlord tax outcomes vary significantly depending on circumstances. Advice should always be tailored.
