Property Taxation

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Property Taxation for Landlords & Investors – UK Guide

Understanding property taxation is critical for UK landlords and property investors seeking to protect profits, remain compliant with HMRC, and legally reduce their tax burden. Whether you’re letting out a single buy-to-let or managing a full property portfolio, knowing how income tax, capital gains tax, and stamp duty land tax apply is essential.

What Taxes Affect UK Property Investors?

UK landlords are subject to a range of property-related taxes, including:

  • Income Tax – Applied to rental income after allowable expenses.

  • Capital Gains Tax (CGT) – Charged on profit made when selling an investment property.

  • Stamp Duty Land Tax (SDLT) – A tiered tax paid on property purchases, with higher rates for additional properties.

  • Corporation Tax – If properties are held in a limited company (SPV), profits are taxed at the corporation tax rate.

Each tax has different thresholds, exemptions, and mitigation strategies.

Property Tax for Landlords: Income, CGT & SDLT

Income Tax on Rental Income

As a landlord, you must declare rental income via your Self Assessment tax return. You can deduct allowable expenses such as letting agent fees, maintenance, and insurance. However, mortgage interest tax relief is now limited to a 20% basic rate credit, reducing profitability for higher-rate taxpayers.

If you’re using mortgage finance, consider reading about Buy-to-Let Mortgage Advice for structures that align with current tax rules.

Capital Gains Tax (CGT)

When you sell a buy-to-let or second home, CGT may apply to the profit. Current rates (as of 2025) are:

  • 18% (basic rate) and 24% (higher rate) on residential property

  • £6,000 annual exemption (dropping to £3,000 in future tax years)

Private Residence Relief and Lettings Relief may apply in some instances. Timing your sale or reinvesting via rollover relief can also reduce your liability.

Stamp Duty Land Tax (SDLT)

Buying additional properties incurs a 3% SDLT surcharge on top of standard rates. Investors using company structures still pay this surcharge.

Learn more about structuring your purchase efficiently with our SPV Limited Company Mortgages guide.

Ways to Reduce Property Tax Legally

Smart planning can significantly reduce your property tax bill. Here are proven strategies:

  • Use a Limited Company (SPV) – Corporation tax (currently 25%) is often lower than higher personal income tax rates.

  • Offset Allowable Expenses – Maintenance, management fees, and some finance costs can be deducted.

  • Transfer Assets Between Spouses – Spouse exemption rules allow income splitting and CGT relief.

  • Consider Incorporation Relief – Transfer your personally owned portfolio into a company without triggering CGT.

  • Plan Sales Around Tax Thresholds – Stagger disposals to maximise your CGT allowance.

Commercial Property & VAT

Commercial properties follow different rules, particularly around VAT and capital allowances. If you’re investing in or refinancing offices, shops, or warehouses, explore Commercial Mortgage Advice to understand how tax applies in those scenarios.

Capital Gains Tax Relief Changes: What Landlords Need to Know

Significant changes to Capital Gains Tax (CGT) rules took effect on 6 April 2020, affecting individuals who sell properties that were once their principal private residence. Two key reliefs, Lettings Relief and Final Period Relief, were revised, reducing landlords’ and former homeowners’ ability to offset gains on the sale of their property.

Updated Lettings Relief Rules

Previously, landlords could benefit from Lettings Relief, which offered up to £40,000 in tax relief if a property was both their main residence and later let to tenants. This relief is applied in addition to the Principal Private Residence (PPR) Relief, providing a valuable tax-saving tool.

However, from April 2020, this relief was restricted to cases where the owner shares the property with the tenant. As a result, many “accidental landlords” those who let out homes due to job relocations or life changes no longer qualify. The narrowing of this rule means fewer landlords can benefit from CGT relief when selling previously rented homes.

Final Period Relief Now Shortened

Final Period Relief previously allowed homeowners to claim CGT relief for the last 18 months of ownership, even if they had already moved out. This was designed to help those in transition—between homes, moving for work, or awaiting a sale.

Since 6 April 2020, the relief period has been reduced to 9 months, narrowing the time window for tax-free gains. There are exceptions:

  • Disabled individuals

  • Sellers moving into long-term residential care

These groups retain the 36-month final period exemption, providing crucial flexibility during significant life events.

What This Means for Landlords and Homeowners

The tightening of these CGT reliefs has direct implications for landlords, especially those looking to sell rental or former residential properties. Accurate CGT calculation is now more complex, and underestimating tax liability could lead to unexpected bills.

If you’re planning to sell a buy-to-let, inherited, or previously lived-in property, understanding your exposure under the new rules is essential. You may also benefit from strategic tax planning—consider whether selling through an SPV or timing disposals across tax years could reduce your liability.

Looking for expert support? Use our free Mortgage Adviser Directory to find a trusted buy-to-let broker who understands landlord needs and local market trends.

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FAQs – Your Property Tax Questions Answered

Question Answer
Do I pay tax on all rental income? Yes, but you can deduct expenses like maintenance, agent fees, and insurance.
Should I buy through a limited company to save tax? Possibly. Learn more in our SPV Limited Company Mortgages section.
What’s the best way to reduce capital gains tax? Use exemptions, reliefs, and time disposals strategically. Consider a tax advisor for complex cases.
Are there different rules for commercial properties? Yes. Check our Commercial Mortgage page for VAT, SDLT, and allowances.
How have CGT reliefs changed since April 2020? Lettings Relief now applies only if you share the property with tenants, and Final Period Relief was reduced from 18 to 9 months. Special rules apply for disabled individuals or those entering care.