The way property income is taxed and reported is changing, adding further complexity for residential landlords. Rental income can arise from a wide range of arrangements, including letting a home, a parking space or other land and buildings, and landlords need to identify it correctly to meet their tax obligations. Reliefs such as Rent a Room and the Property Allowance may reduce the tax or reporting burden in qualifying cases..
The tax position depends partly on how the property is owned. Individual landlords are currently taxed on rental profits as non-savings income, but separate and higher property-income tax rates are planned from 2027/28.
Joint owners must consider how income is allocated, while using a company can offer benefits such as loan-interest relief but may also create incorporation costs, added reporting and further tax when profits are withdrawn.
Accurate expense records are essential because only qualifying costs can be deducted from rental income. Routine letting costs, maintenance and repairs are generally allowable, whereas capital improvements are not. Relief may also be available for replacing certain domestic items, while finance-cost relief for individual residential landlords is restricted to a tax reduction rather than a full deduction from rental profits.
Making Tax Digital is also changing how many landlords report income. Affected landlords must keep digital records and submit quarterly updates through compatible software, followed by an end-of-year finalisation. The income threshold will fall to more than £30,000 from April 2027 and more than £20,000 from April 2028, making timely record-keeping, tax planning and a review of ownership structures increasingly important.
Download the full PDF factsheet for a practical overview of the rules, planning considerations and compliance risks affecting landlords.
