Landlord Tax, Mortgage and Compliance FAQs

Tax and compliance rules for landlords are changing quickly. These answers cover the questions landlords in Bury and Ramsbottom ask us most about tax, mortgages, energy ratings and ending a tenancy. For tax decisions, always speak to an accountant.

How is rental income taxed?

Rental income is taxed as part of your income, so you pay income tax on your rental profit at your usual rate. Profit is the rent minus allowable expenses, such as letting agent fees, repairs, insurance, safety certificates and accountancy. If your rental income is £1,000 or less a year, the property allowance means you may not need to declare it. Above that, you report it through Self Assessment. From April 2027, separate property income tax rates of 22%, 42% and 47% are due to apply.

Can landlords claim mortgage interest against tax?

Not as an expense, if you own the property in your own name. Under the rules known as Section 24, mortgage interest and other finance costs on residential lets are no longer deducted from your rental profit. Instead you get a tax reduction worth 20% of those costs, which is due to rise to 22% from April 2027 to match the new property basic rate. Higher-rate taxpayers lose out most. Limited companies are treated differently and can still deduct interest as a business cost.

What is Making Tax Digital for landlords?

Making Tax Digital for Income Tax means keeping digital records and sending HMRC quarterly updates through compatible software, instead of a single tax return. It started on 6 April 2026 for landlords and sole traders whose combined property and self-employment income was over £50,000 in the 2024 to 2025 tax year. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Jointly owned property counts your share of the income. Talk to your accountant about software well before your start date.

Do I pay capital gains tax when I sell a rental property?

Yes, if the property has gone up in value and wasn't your main home, you'll usually pay capital gains tax on the gain. For residential property the rate is 18% within your basic-rate band and 24% above it, after the annual exempt amount of £3,000. You must report the sale and pay any tax to HMRC within 60 days of completion, using a UK property account. Buying and selling costs and some improvements can reduce the gain, so keep your receipts.

Do I pay extra stamp duty on a buy-to-let?

Yes. If you already own a home, buying an additional residential property for £40,000 or more usually means paying the higher rates of stamp duty, which are 5% above the standard rates on each band. On a typical local purchase that can add thousands to the cost, so build it into your figures. Companies buying residential property pay the higher rates as well. Use the GOV.UK stamp duty calculator, or ours, to check the exact amount before you offer.

Our stamp duty calculator

Should I put my rental property in a limited company?

It depends on your income, plans and the size of your portfolio, so take advice from an accountant before deciding. A company pays corporation tax on profits and can deduct mortgage interest in full, which can suit higher-rate taxpayers. But moving a property you already own into a company usually counts as a sale, which can trigger capital gains tax and stamp duty, and company buy-to-let mortgages often cost more. Taking money out of a company is taxed again too.

How much deposit do I need for a buy-to-let mortgage?

Most buy-to-let lenders want a deposit of at least 25% of the purchase price, and some deals need more. Lenders also check that the expected rent comfortably covers the mortgage interest at a stress-tested rate, which can limit how much you borrow even with a large deposit. Your own income and experience as a landlord are also taken into account. A broker who works with buy-to-let can compare lenders, as their rental tests vary.

What EPC rating does a rental property need?

A rental property in England must currently have an EPC rating of E or above, unless a valid exemption is registered. The government has confirmed that privately rented homes must reach the equivalent of EPC C by 1 October 2030, measured under new EPC metrics. There's a cost cap of £10,000 per property, and spending from 1 October 2025 counts towards it. Older EPCs rated C that were issued before 1 October 2029 will still count until they expire.

What is the Decent Homes Standard for private landlords?

The Decent Homes Standard sets out the minimum condition a home must meet, covering serious hazards, a reasonable state of repair, modern facilities and adequate warmth. It has applied to social housing for years, and the Renters' Rights Act extends it to private rented homes. The government has said the new standard will apply to the private sector from 2035. Councils can already act on serious hazards now under the Housing Health and Safety Rating System, so fixing problems early makes sense.

Does Awaab's Law apply to private landlords?

Not yet. Awaab's Law sets strict timescales for landlords to investigate and fix damp, mould and other serious hazards. It has applied to social landlords since 27 October 2025, and the Renters' Rights Act gives the government the power to extend it to private rented homes, but no start date has been set. In the meantime, private landlords still have to keep homes free of serious hazards, and tenants can report damp and mould to the council.

Report a repair

What is a Right to Rent check?

A Right to Rent check confirms that an adult tenant can legally rent in England. Landlords, or their agent, must check before the tenancy starts for every adult who will live there, whether or not they're named on the tenancy. That means seeing original documents in person, or using the Home Office online checking service for people with digital status, and keeping copies. Some tenants need a follow-up check when their permission runs out. Letting someone rent without a valid check can lead to a fine.

How do I evict a tenant under the new rules?

Since 1 May 2026, landlords in England can only end an assured tenancy using a Section 8 notice with a valid legal ground, such as serious rent arrears, selling the property or moving back in. Each ground has its own notice period and evidence. If the tenant doesn't leave by the end of the notice, you must apply to court for a possession order, and only court-appointed bailiffs can carry out an eviction. Never change the locks or remove belongings yourself, as that is illegal eviction.

Can I claim for repairs and improvements on a rental?

You can claim the cost of repairs and maintenance against your rental income, such as fixing a boiler, replacing a broken window or redecorating between tenants. Improvements that add something new, such as an extension or a loft conversion, are capital costs. They can't be set against rental income, but they can reduce your gain for capital gains tax when you sell. Replacing an item like for like, such as a worn kitchen with a similar one, usually counts as a repair.

Got a question we haven't answered?

Call us on 01706 310171, email sales@bowmanestatesltd.com or pop into the office at 88 Bolton Road West, Ramsbottom. If you're thinking of selling, you can book a free, no-obligation valuation.