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Buy-to-let returns, how to reduce the tax

Industry Insight May 21st, 2015
Buy-to-let returns, how to reduce the tax

How to increase your buy-to-let returns by reducing your tax bill

Buy-to-let returns can be significantly improved by claiming tax deductibles reducing your HMRC bill. For more detailed information visit HMRC guidlines

HM Revenue & Customs views letting out a property as a business like any other, which means all landlords must pay tax on the profits they make – but only after costs are deducted. The taxman calls these “allowable expenses” Below are areas to be included to reduce your tax bill and increase your buy-to-let returns


  • Mortgage fees-Broker and arrangement fees are tax deductible and can be claimed back in the year you arranged a mortgage
  • Mortgage interest –Many savvy landlords keep their property mortgaged even if they can afford to pay it off to benefit from this tax breakYou can use all the interest you pay on your mortgage each year to offset your tax bill. If you have an interest-only mortgage, your whole monthly repayments will be tax deductible. If your repayments are roughly equal to your net income, you will not have to pay any income tax on the property at all.
  • Letting agent fees
  • Securing a tenant-If you decide to rent your property privately, you can claim back the cost of advertising for tenants, purchasing a tenancy agreement, credit checking, referencing, deposit protection and professional inventory costs
  • Buildings and contents insurance premiums
  • Maintenance and repairs-you cannot claim for renovations, extensions or improvements that add value to the property
  • Furniture – If the property is furnished, you can choose to claim back either a general “wear and tear” allowance or the exact cost of replacing individual items.The wear and tear allowance is 10pc of the rent annually. **you cannot claim back the cost of furnishing the property in the first place.
  • Ground rent and service
  • Council tax and utility bills
  • Others-Other direct costs of letting the property such as phone calls, stationery and the costs of travelling between different properties for the purposes of the rental business
  • Accountant  fees


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