How to Start as a Residential Landlord in the UK

Becoming a residential landlord can provide a steady income stream and long-term capital growth. But the tax landscape has changed significantly in recent years, and understanding the rules before you buy your first property is essential.

Before You Buy

Mortgage

You need a buy-to-let mortgage — residential mortgages do not permit letting. Buy-to-let mortgages typically require:

• A minimum 25% deposit (some lenders require more)
• Rental income at least 125–145% of the mortgage payment
• Good personal credit history
• Many lenders require you to already own your own home

Surveys and Due Diligence

Before purchasing, get a full building survey, check for any local licensing requirements, and ensure the property meets minimum standards for rental (the Housing Health and Safety Rating System — HHSRS).

Registering with HMRC

You must declare rental income to HMRC. Register for Self Assessment if your rental income exceeds £1,000 per year (after the property income allowance).

If your total rental income exceeds £1,000, you must file a Self Assessment tax return. You declare your rental income and allowable expenses on the property pages of the return.

VAT: Residential letting is exempt from VAT. You do not charge VAT to tenants and cannot reclaim VAT on most expenses.

Sole Trader, Partnership, or Limited Company?

This is one of the most important decisions for landlords, primarily because of Section 24 (the mortgage interest restriction):

Personal Ownership (Sole Trader)

You own the property in your own name. Rental profits are added to your other income and taxed at your marginal rate. Since April 2020, you can no longer deduct mortgage interest as an expense. Instead, you receive a 20% tax credit on your mortgage interest. For higher-rate taxpayers, this significantly increases your tax bill.

Limited Company

If you purchase through a company, mortgage interest is fully deductible as a business expense. Corporation Tax (19–25%) may also be lower than your personal tax rate. However, extracting profits from the company through dividends creates additional tax, and buy-to-let mortgage options for companies are more limited and often at higher interest rates.

Partnership

Useful if you are buying with a spouse or business partner. Income can be split according to the partnership agreement.

For new landlords buying additional properties, a limited company structure is increasingly popular due to the Section 24 restrictions. For landlords with existing personal portfolios, the decision to transfer properties to a company involves Stamp Duty Land Tax and potential Capital Gains Tax, so take professional advice.

Licensing

Check whether your property or area requires a licence:

• HMO licence — mandatory for Houses in Multiple Occupation (typically 5+ tenants forming 2+ households). Many councils also have additional licensing schemes for smaller HMOs.
• Selective licensing — some councils require all private rented properties in designated areas to be licensed.

Failure to obtain a required licence can result in fines of up to £30,000 and rent repayment orders.

Legal Requirements

As a landlord, you must:

• Provide an Energy Performance Certificate (EPC) — minimum rating of E
• Carry out annual gas safety checks (Gas Safe registered engineer) and provide the certificate to tenants
• Install smoke alarms on every floor and carbon monoxide alarms in rooms with solid fuel appliances
• Protect the tenant's deposit in a government-approved scheme (DPS, MyDeposits, or TDS)
• Serve the correct notices and follow proper procedures for tenancy agreements
• Comply with the right to rent checks — verify tenants' immigration status
• Provide the How to Rent guide to tenants
• Ensure electrical installations are safe — EICR (Electrical Installation Condition Report) every 5 years

Claimable Expenses

Revenue Expenses (Deductible Against Income)

• Letting agent fees — management fees, tenant-finding fees
• Insurance — landlord buildings and contents, rent guarantee
• Maintenance and repairs — plumbing, electrical, decorating, general repairs (but NOT improvements)
• Council tax — during void periods
• Utility bills — during void periods or if included in the rent
• Ground rent and service charges — for leasehold properties
• Accountancy fees
• Legal fees — for eviction, tenancy agreements (but not property purchase)
• Advertising — for finding tenants
• Travel — to the property for inspections and maintenance, at 45p per mile
• Stationery and phone costs
• Safety certificates — gas safety, EPC, EICR

Capital Expenditure (Not Directly Deductible)

Improvements (as opposed to repairs) are not deductible as revenue expenses. Examples:

• Building an extension
• Upgrading a kitchen to a significantly higher standard
• Converting a loft

These costs are added to the property's base cost and reduce your Capital Gains Tax bill when you eventually sell.

Replacement of Domestic Items Relief

You can claim relief for replacing furnishings in a let property — carpets, curtains, white goods, furniture. The relief is for the cost of the replacement item (not the original), and only if it is a like-for-like replacement.

Accounted helps landlords track rental income, expenses, and mortgage interest for their tax returns.

Industry-Specific Tax Rules

Section 24 — Mortgage Interest Restriction

Since April 2020, individual landlords cannot deduct mortgage interest from rental income. Instead, you receive a 20% tax credit. This means:

• Basic-rate taxpayers — effectively no change
• Higher-rate taxpayers — significantly higher tax bill
• Additional-rate taxpayers — even more impact

This does not apply to limited companies.

Capital Gains Tax

When you sell a rental property, you pay CGT on the gain. Current rates are 18% (basic rate) and 24% (higher rate) for residential property. You must report and pay CGT within 60 days of completion.

Stamp Duty Land Tax

Purchasing an additional residential property attracts a 5% surcharge on top of the normal SDLT rates (as of the current rates).

Bookkeeping Tips

• Keep every receipt related to the property
• Separate property finances from personal finances
• Track income and expenses by property if you have multiple lets
• Record mortgage statements — you need the interest figures for your tax credit
• Keep records of all capital expenditure — needed for CGT calculations when you sell
• Set aside money for tax — especially if you are a higher-rate taxpayer

Accounted is designed for UK landlords. Track rental income, expenses, and mortgage interest all in one place.

Key Deadlines

• 31 January — Self Assessment and payment
• 31 July — second payment on account
• 60 days after sale — CGT report and payment on property disposals

Getting Started

Being a landlord requires careful planning, particularly around the tax structure of your ownership. Get professional advice before buying, understand the Section 24 impact, and keep meticulous records from day one.

Ready to manage your rental finances properly? Sign up for Accounted and let Penny track your rental income and expenses automatically.