How can I Reduce Tax on Rental Income?

Reduce Your Rental Income Tax: A Legal Guide for UK Landlords

Whether you're managing student flats to rent in Bristol or letting out a spare room, understanding what you can claim as expenses is one of the simplest ways to reduce your tax bill legally. HMRC allows landlords to deduct certain costs from their rental income before calculating tax. If done right, this can save you thousands each year.

Allowable Expenses You Can Claim

Here are some of the most common and often overlooked deductions:

• Property repairs and maintenance (e.g., fixing leaks, repainting, boiler servicing)
• Letting agent and management fees
• Landlord insurance (buildings, contents, rent guarantee)
• Council tax, gas, electric, water bills (if you pay them)
• Accountant or legal fees related to the rental
• Travel costs for property visits or maintenance supervision
• Advertising costs for listing your property online
• Ground rent and service charges

Note: These must be “wholly and exclusively” for the rental business. Improvements (like a new kitchen or loft conversion) aren’t deductible they fall under capital gains.

What About Mortgage Interest?

You can no longer deduct the full mortgage interest from rental income. Instead, you now receive a 20% tax credit on the interest portion of your mortgage payments. This applies to most individual landlords, not limited companies.

Other Tips to Lower Tax‍

• Use the £1,000 property allowance: if you earn less than that in rent per year, no tax return needed
• Offset losses: if you spend more than you earn in a year, the loss can be carried forward to reduce tax on future rental profits
• Split income between spouses (if co-owners) to take advantage of personal allowances
  

Keep Good Records

To stay compliant and avoid penalties, keep detailed records of all income, expenses, and receipts especially if you’re wondering how much to rent a flat in Bristol and want to track profit margins.

For full guidance, visit
→ gov.uk/rent-out-property
→ gosimpletax.com – Landlord Expense Guide