Guide — Tax & Compliance
Property Portfolio Tax Guide: What UK Landlords Must Know in 2025
Tax is the single biggest drag on landlord returns — and it has got significantly harder since 2020. Section 24, the CGT rate change, and the 60-day reporting window have all shifted the landscape. Here is what you actually need to know, with worked numbers.
Section 24: the mortgage interest restriction
Before 2017, landlords could deduct mortgage interest as a cost against rental income. Section 24 of the Finance Act phased that out entirely. Since April 2020, you cannot deduct mortgage interest at all — instead you receive a basic rate (20%) tax credit on the interest paid. For higher-rate taxpayers, this is a massive difference.
Worked example: Higher-rate taxpayer before vs after Section 24
Assumptions: £2,000/month rent (£24,000/year), £800/month mortgage interest (£9,600/year), other costs £3,000/year. Higher-rate taxpayer (40%).
Before Section 24
After Section 24 (2025)
Section 24 has more than halved net profit on this property — from £6,840 to £3,420 — without any change in rent, costs, or mortgage rate. Basic-rate taxpayers are unaffected; the impact falls entirely on higher and additional-rate taxpayers.
Capital Gains Tax on residential property
From October 2024, CGT rates on residential property changed. The main rates are now 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The previous rates (18%/28%) were reduced on the higher rate band. You also need to know about the annual exemption and the 60-day reporting rule.
| Taxpayer Band | CGT Rate (from Oct 2024) | Previous Rate |
|---|---|---|
| Basic rate (up to £50,270) | 18% | 18% |
| Higher rate (£50,270–£125,140) | 24% | 28% |
| Additional rate (over £125,140) | 24% | 28% |
Annual CGT exemption 2024/25: £3,000
Down from £12,300 in 2022/23. The dramatic reduction means almost all property sales now generate a CGT liability. The exemption is per person — couples can use both allowances (£6,000 combined) if the property is jointly owned.
The 60-day CGT reporting deadline
Since April 2020, you must report and pay any CGT owed on a residential property sale within 60 days of completion. This applies even if your total tax return is not yet due. Missing the deadline results in automatic penalties starting at £100, rising the longer you wait. Your solicitor should flag this at completion — but many do not. The report is filed through HMRC's online Capital Gains Tax service.
Key CGT rules for landlords
- Report and pay within 60 days of completion (not exchange)
- Deduct purchase costs, SDLT, legal fees, and genuine capital improvement costs
- Deduct selling costs: estate agent fees, legal fees
- Private Residence Relief (PRR) may apply if you ever lived in the property
- Lettings Relief has been severely restricted since April 2020
- Capital losses from other assets can be offset against gains
Stamp Duty Land Tax on investment property
From April 2025, the SDLT surcharge on second homes and investment properties increased from 3% to 5%. This applies to every band on top of the standard residential rates. On a £250,000 property, the additional SDLT cost is approximately £12,500 compared to a primary residence purchase.
SDLT calculation on a £220,000 BTL purchase
For a first-time buyer purchasing the same property as a primary residence, SDLT would be £0 (first-time buyer relief applies up to £300,000). The £15,750 is pure acquisition cost that cannot be recovered unless you sell above purchase price.
Allowable expenses landlords can claim
Allowable expenses reduce your taxable rental income. They do not reduce your mortgage interest deduction — that is calculated separately as a 20% tax credit under Section 24. Allowable expenses must be wholly and exclusively for the rental business.
Letting agent fees
Finding tenants, rent collection, management — all allowable. Typically 8–15% of rent.
Repairs and maintenance
Fixing what exists — roof repairs, boiler servicing, redecorating between tenancies. Improvements are not allowable.
Buildings and contents insurance
Landlord-specific policies. Standard home insurance is not valid and cannot be claimed.
Professional fees
Accountant fees, solicitor fees for tenancy agreements (not property purchase), surveyor costs.
Furniture replacement relief
Replaced furniture, appliances, or furnishings in furnished lettings. The old wear-and-tear allowance no longer applies.
Utility and service costs
When you pay utilities during void periods, or service charges on leasehold properties.
Not allowable
Capital expenditure (extensions, loft conversions, new kitchens that improve rather than restore), private use costs, clothing, and personal travel to view potential purchases. HMRC draws a clear line between repairs (allowable) and improvements (not allowable) — and they will challenge grey areas.
Incorporation: should you move your portfolio to a limited company?
Section 24 only applies to individuals. A limited company can still deduct mortgage interest in full before calculating corporation tax. For higher-rate taxpaying landlords with large mortgaged portfolios, this creates a compelling case for incorporation. But the entry costs are significant.
Pros of incorporating
- Full mortgage interest deductible against corporation tax
- Corporation tax (25%) lower than higher-rate income tax (40%)
- Retain profits in company at lower rate for reinvestment
- Easier to bring in business partners or family members
- Inheritance tax planning opportunities
Cons of incorporating
- SDLT on full market value at transfer (major upfront cost)
- CGT on any gain at time of transfer (treated as a disposal)
- Company BTL mortgages carry higher rates (0.5–1% premium)
- Annual accountancy costs increase (£1,000–£3,000/year)
- Extracting profits incurs dividend tax on top of corporation tax
The SDLT and CGT on transfer means incorporation rarely makes sense for existing portfolios with low mortgage balances or significant capital gains. It tends to make sense when: you are starting fresh, you have a large mortgaged portfolio, and you are a higher or additional rate taxpayer planning to hold long-term without extracting income regularly.
Self-assessment for landlords
If you earn rental income, you must file a self-assessment tax return each year — even if you are a PAYE employee. HMRC expects you to register within 6 months of the end of the first tax year in which you receive rental income. The online deadline is 31 January following the tax year end.
Self-assessment checklist for landlords
- Register for self-assessment by 5 October following your first rental year
- Keep records of all rent received — bank statements are the primary evidence
- Keep receipts for every expense you intend to claim
- Record start/end dates for each tenancy and any void periods
- If you use an agent, request a year-end statement showing all income and fees
- Submit by 31 January online (or 31 October for paper returns)
- Payment on account: HMRC may require advance payments if your tax bill exceeds £1,000
Frequently asked questions
Does Section 24 apply to limited companies?
No. Section 24 only applies to individual landlords. A limited company can still deduct mortgage interest in full before calculating corporation tax. This is the primary reason higher-rate taxpaying landlords consider incorporation.
What is the CGT deadline after selling a rental property?
You must report the gain and pay any tax owed within 60 days of the completion date — not the exchange date. File through HMRC's online Capital Gains Tax service. Missing this deadline triggers automatic penalties, starting at £100.
Can I claim travel costs to visit my rental properties?
HMRC allows travel costs to manage existing lettings — for example, travelling to inspect the property or meet a contractor. Travel to view potential purchases is not allowable. Keep mileage logs or transport receipts as evidence.
Should I incorporate my property portfolio?
Only if you are a higher/additional rate taxpayer, have a large mortgaged portfolio, and plan to hold for the long term without extracting income regularly. The SDLT and potential CGT on transfer are significant entry costs that take years to recoup through the tax saving. Always get specialist advice before transferring.
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