Harnett Accontants

Harnett & Co | Chartered Accountants, Kingston upon Thames
Global House Business Centre 1 Ashley Avenue Epsom Surrey KT18 5AD
ICAEW Authorised Practice
01372253100
Property & Landlord Tax | Harnett & Co Chartered Accountants Kingston upon Thames Skip to main content
Specialist Services

Property &
Landlord Tax

Property tax in the UK has become significantly more complex over the past decade. From the removal of finance cost relief to higher SDLT rates and the CGT reporting window, getting the numbers right matters more than ever. We advise residential and commercial landlords across West London and Surrey on every aspect of property taxation.

📞 01372253100
Property taxation

Property tax has become considerably more complex and considerably more expensive for landlords

The tax treatment of residential property investment has changed substantially since 2017. The phased removal of mortgage interest relief for individual landlords, completed by April 2020, means that higher and additional rate taxpayers who own property personally can no longer offset their full finance costs against rental income. For many landlords this has turned a profitable investment into one that generates a significant tax liability on paper even when cashflow is neutral or negative.

At the same time, Stamp Duty Land Tax on second properties has increased, Capital Gains Tax rates on residential property sit above those for other assets, and the reporting and payment window for CGT on property disposals has been tightened to 60 days from completion. Missing this deadline results in an automatic penalty.

Whether you own a single buy-to-let property or a portfolio of commercial and residential assets, we help you understand your tax position, structure your affairs efficiently within the rules and meet every filing and payment deadline. We also advise on whether moving your portfolio into a limited company would be beneficial for your specific situation.

Rental income returns prepared correctly - all allowable expenses claimed, finance cost restriction applied accurately and property income pages completed for self assessment
CGT on property disposals - 60-day reporting to HMRC met, payment on account calculated correctly and all available reliefs including private residence relief identified
SDLT planning before purchase - higher rates for additional dwellings, first-time buyer relief and multiple dwellings relief all reviewed before any transaction completes
Property company advice - full analysis of whether incorporating your portfolio would be tax-efficient, including CGT and SDLT on transfer and ongoing corporation tax modelling
Furnished holiday let advice - following the FHL regime abolition in April 2025, we advise on reclassification and tax position going forward
Let Property Campaign - if you have undisclosed rental income, we handle the voluntary disclosure to minimise penalties before HMRC data matching raises the issue
What we cover

Every aspect of property and landlord taxation

From a single rental property through to a mixed commercial and residential portfolio, we cover every element of the property tax compliance and planning landscape.

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Rental Income Tax Returns
Annual self assessment returns covering all UK rental income. Allowable expenses reviewed in full including repairs, agent fees, insurance, mortgage interest (finance cost restriction applied correctly), service charges and pre-letting expenses.
Core service
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Capital Gains Tax on Property
CGT calculation and 60-day report to HMRC following sale of residential property. Private residence relief, lettings relief, principal private residence elections for multiple properties and base cost planning all reviewed before disposal.
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SDLT Planning and Advice
Stamp Duty Land Tax review before any property purchase. Higher rates for additional dwellings (3% surcharge now standard), multiple dwellings relief, mixed-use SDLT rates, first-time buyer relief and SDLT reclaims where overpaid.
Pre-purchase
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Property Company Incorporation
Full analysis of whether incorporating a property portfolio into a limited company is beneficial. We model the corporation tax position, extraction strategy, CGT and SDLT on transfer and long-term tax savings versus upfront costs.
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Non-Resident Landlord Scheme
UK rental income tax compliance for landlords resident overseas. Registration under the Non-Resident Landlord Scheme, self assessment returns and advice on treaty relief where a double tax agreement applies.
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Property Portfolio Structuring
Tax-efficient structuring advice for landlords with multiple properties, including profit and loss allocation between spouses, beneficial interest declarations, bare trust arrangements and partnership structures where appropriate.
Planning
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Let Property Campaign
Voluntary disclosure for landlords with undisclosed rental income. HMRC's data matching programme is highly effective at identifying undeclared rental income. Using the campaign with professional advice results in the lowest available penalty rates.
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Commercial Property Tax
VAT on commercial property transactions, capital allowances on commercial property fit-out, SDLT on commercial property purchases and tax treatment of commercial rental income. Particularly relevant for mixed-use portfolios.
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Annual Tax on Enveloped Dwellings
ATED compliance for residential properties held in companies with a value over £500,000. Annual return filed, relief claims made where applicable (for properties let on a commercial basis) and 15% SDLT charge reviewed on acquisition.
Key rates and thresholds

The rates that determine how much tax your property generates

Property tax involves several overlapping regimes, each with their own rates, thresholds and reporting obligations. Knowing which rates apply to your situation - and whether any reliefs or elections are available - is the difference between an acceptable tax bill and an unnecessarily large one.

For higher rate taxpayers, rental income is taxed at 40% with only a 20% basic rate tax credit available on mortgage interest. This means that for a higher rate taxpayer with a mortgaged rental property, the effective tax rate on gross rental income can be considerably higher than on other income. Restructuring into a company, or adjusting the ownership structure between spouses, can materially reduce this.

CGT rates on residential property are higher than on other assets following the October 2024 Budget changes. The 60-day reporting window from completion means there is very little time to prepare the calculation, arrange payment and file the report. We manage this process for clients who are selling or have recently sold a property.

Income Tax on Rental Profits (2025/26)
Rate band
Rate
Basic rate (up to £50,270)
20%
Higher rate (£50,271 to £125,140)
40%
Additional rate (over £125,140)
45%
Finance cost tax credit (individual landlords)
20%
Finance cost restriction applies to individuals only. Companies can still deduct full interest costs.
CGT on Residential Property (post-Oct 2024)
Taxpayer band
CGT rate
Basic rate taxpayer
18%
Higher / additional rate taxpayer
24%
Annual exempt amount (2025/26)
£3,000
60-day reporting window
From completion
These rates apply to residential property. Other assets are taxed at 10% / 20%.
SDLT - Residential Property (2025/26)
Band
Standard
Additional dwelling
Up to £125,000
0%
5%
£125,001 to £250,000
2%
7%
£250,001 to £925,000
5%
10%
£925,001 to £1.5m
10%
15%
Over £1.5m
12%
17%
Additional dwelling surcharge applies to all purchases of residential property where the buyer already owns one or more properties.
Capital gains tax on property

Selling a property? The 60-day CGT reporting deadline leaves very little time

Since April 2020, individuals who sell a UK residential property and have a CGT liability must report the gain and make a payment on account within 60 days of completion. This is a separate obligation from the annual self assessment return, and the penalty for missing the deadline is charged automatically by HMRC regardless of whether any additional tax is ultimately due.

The calculation involves identifying the original purchase cost and associated legal fees, adding any improvement expenditure (but not repair or maintenance costs), deducting selling costs, applying private residence relief if the property was ever your main home, and comparing the remaining gain to the annual exempt amount before applying the correct CGT rate.

Where a property was previously your main home, the final nine months of ownership always qualifies for private residence relief regardless of whether you were living there. If the property was your only or main residence at any point during ownership, the full calculation needs to be worked through carefully - there is often more relief available than people realise.

Private Residence Relief
Key relief
Eliminates or reduces CGT where the property was your main home at any point. The final nine months of ownership always qualify. If the property was your sole main residence throughout, there is no CGT at all on disposal. Careful elections between properties can significantly increase the relief available.
Annual Exempt Amount
2025/26
Each individual has an annual CGT exempt amount of £3,000 in 2025/26. On jointly owned property, both owners use their own exempt amount, effectively doubling the available exemption on a gain. Timing the disposal to use allowances across two tax years can also be effective.
Improvement Expenditure
Often missed
Capital expenditure that enhances the value of the property - extensions, loft conversions, new kitchens that represent an improvement rather than a replacement - is added to the base cost, reducing the chargeable gain. Revenue repairs and maintenance are not allowable here but are deductible against rental income.
Reporting and Payment
60 days
Report must be submitted and payment on account made within 60 days of completion. This is separate from the self assessment return. If the property is not in the UK, different rules may apply. We prepare and submit the 60-day return on your behalf and ensure the payment is correctly calculated.
Personal vs company ownership

Is a property company the right structure for your portfolio?

Since the restriction of mortgage interest relief for individual landlords, there has been significant interest in property limited companies as an alternative ownership structure. A company can still deduct full mortgage interest costs against rental income, pays corporation tax on profits at 19% to 25% rather than income tax at up to 45%, and allows profits to be retained within the company and reinvested.

However, incorporation is not straightforward and is not right for everyone. Transferring existing properties into a company typically triggers a CGT disposal at market value and SDLT on the transfer, which can be substantial. For landlords with heavily mortgaged properties, the upfront costs may outweigh the ongoing tax savings for many years.

We model the full position for each client - upfront transfer costs, ongoing tax savings, extraction strategy and longer term estate planning implications. For landlords starting out or purchasing new properties, acquiring through a company from the outset avoids the incorporation costs entirely. We advise on the optimal approach for your specific circumstances and portfolio size.

Feature
Individual
Ltd Company
Mortgage interest deduction
20% credit only
Full deduction
Tax rate on profits
20% to 45%
19% to 25%
Profit retention in entity
Not applicable
Yes - reinvest tax-free
CGT on disposal
18% / 24%
Corp tax + extraction tax
Admin burden
Lower
Higher
Mortgage availability
Wider choice
Specialist lenders
IHT planning
Limited options
More flexibility
SDLT on transfer in
N/A
Applies on market value
How we work

From initial review to ongoing compliance - a clear process for every landlord

We start by understanding your portfolio and current tax position, then put the right structure and compliance processes in place.

1

Portfolio review

We review your properties, current ownership structure, mortgage position and historic tax returns to understand the full picture and identify any issues or planning opportunities.

2

Tax position advice

We advise on the most tax-efficient ownership structure, any planning available to reduce the current year liability and any upcoming disposals or purchases that need advance planning.

3

Annual compliance

Self assessment returns prepared with all property income and expense schedules completed accurately. Finance cost restriction applied correctly and all allowable expenses claimed.

4

Transaction support

SDLT review before purchase, CGT calculation and 60-day report on disposal, and advice on any restructuring triggered by a change in the portfolio.

Furnished holiday lets

The FHL regime was abolished from April 2025 - what this means for short-let property owners

Important: FHL regime abolished April 2025
The Furnished Holiday Let tax regime was abolished from 6 April 2025. Properties previously qualifying as FHLs are now taxed as ordinary rental property. The advantageous tax treatment that applied under the FHL rules - including capital allowances, pension contribution treatment and CGT business asset disposal relief - no longer applies from this date.

Former FHL owners need to understand what has changed and what has not. Properties that were previously qualifying FHLs and were disposed of before 6 April 2025 retain the old CGT treatment. Properties held at abolition date are now subject to the standard residential property CGT rules, meaning business asset disposal relief (which provided a 10% CGT rate) is no longer available on future disposals.

Capital allowances previously claimed on qualifying FHL assets can no longer be claimed after April 2025. Any unclaimed pool balance at abolition will need to be transitioned into the standard property income calculation. We review the position for each client affected and advise on the practical steps required.

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No longer available post April 2025
Business Asset Disposal Relief (10% CGT rate), capital allowances on furniture and equipment, pension contribution qualification from FHL profits, and loss offset against other income.
✅
Still available as standard rental property
Allowable expense deductions for revenue costs, mortgage interest subject to the finance cost restriction, CGT on disposal (at 18%/24%) with private residence relief if applicable, and annual exempt amount.
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Transitional planning
Review of capital allowances pool position at abolition date, reclassification of income for 2025/26 returns and advice on whether continuing as a short-let property remains tax-efficient versus long-term rental.
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Ongoing advice
We advise owners of short-let properties - whether Airbnb, holiday cottage or serviced accommodation - on their current tax position and the most tax-efficient way to run the property going forward.
Common questions

Property and landlord tax questions answered

Individual landlords can no longer deduct mortgage interest directly from rental income. Since April 2020, the full restriction has been in place and mortgage interest costs instead receive a 20% basic rate tax credit. This means that for higher rate (40%) and additional rate (45%) taxpayers, the effective relief on mortgage interest is only 20% rather than 40% or 45%. The property income figure for tax purposes is therefore higher than the actual cashflow would suggest. Limited companies are not subject to this restriction and can still deduct full mortgage interest costs, which is one reason property companies have become more popular among higher-rate taxpayer landlords with mortgaged properties.
Allowable expenses include letting agent fees and management charges, buildings and contents insurance, repairs and maintenance (but not improvements or initial decoration before first letting), service charges and ground rent, council tax and utility bills where paid by the landlord, accountancy fees, legal fees for tenancy agreements (but not the initial lease on a new property), and travel directly related to managing the property. You can also claim a replacement domestic items relief for furnished properties - the cost of replacing items like furniture, white goods and curtains on a like-for-like basis. Capital items - improvements, extensions, new kitchens - cannot be deducted against rental income but may reduce CGT on eventual disposal.
If you sold a UK residential property and have a capital gains tax liability, you must submit a 60-day report and make a payment on account within 60 days of the completion date. This applies even if you will also include the gain in your annual self assessment return. Failure to report within 60 days results in an automatic penalty of £100, rising to £300 or 5% of the tax if further delayed. If the property was your only and main residence throughout ownership, private residence relief should eliminate the CGT liability entirely and you do not need to file a 60-day report. Contact us as soon as your sale completes and we will prepare the report and calculate the payment due.
The answer depends on your personal tax rate, mortgage situation, intended holding period and extraction strategy. As a general guide, a limited company becomes more attractive the higher your personal tax rate and the more significant the mortgage interest costs. At 19% to 25% corporation tax and with full interest deductibility, a company typically generates more after-tax profit than an individual at 40% with only a 20% credit on interest. However, the income when extracted from the company is subject to further tax as salary or dividends, so the combined rate needs to be modelled against your personal position. Mortgage availability and rates for company buy-to-let are also typically less favourable than for individuals, which can offset some of the tax advantage. We model both scenarios with your specific numbers before you make a purchase decision.
Come forward voluntarily using HMRC's Let Property Campaign before HMRC contacts you. HMRC's data matching programme receives information from letting agents, land registration data and various other sources and is effective at identifying landlords who have not declared rental income. An unprompted voluntary disclosure results in significantly lower penalties than a prompted one. For a careless error, an unprompted disclosure can result in a 0% penalty on the underpaid tax. If HMRC opens an investigation first, prompted penalty rates of 15% to 30% apply for careless behaviour. We calculate the liability across all affected years, prepare the disclosure and negotiate with HMRC to achieve the best possible outcome.
When you buy an additional residential property - whether a buy-to-let, a second home or any other residential property where you already own at least one other - the higher rates for additional dwellings apply. This adds a 5% surcharge to each SDLT band. On a property costing £300,000 for example, the standard SDLT would be £5,000 but with the additional dwelling surcharge it becomes £20,000. The surcharge does not apply if the property is replacing your main home and you sell your previous main home on the same day or within three years. SDLT planning before any property transaction can identify whether any reliefs or exemptions apply and should be done before contracts are exchanged, as SDLT cannot generally be renegotiated after completion.
ATED is an annual tax charged on residential properties in the UK valued over £500,000 that are owned by companies, partnerships with corporate members or collective investment schemes. The annual charge ranges from £4,400 for properties valued between £500,000 and £1m to £269,450 for properties worth over £20m (2025/26 rates). Relief is available where the property is let on a commercial basis, used for property development, held by a property trading company or used for charitable purposes. Properties within the relief still need to file an annual return claiming the relief. If you own residential property through a company at these values, ATED compliance needs to be on your annual compliance calendar.
Related services
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Self Assessment and Personal Tax
Your rental income and property gains sit within your overall personal tax position. We prepare your full self assessment return, coordinating all income sources, reliefs and payments on account to ensure the correct liability.
Learn more ›
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Tax Investigation Support
If HMRC opens an enquiry into your rental income or property gains we represent you throughout the investigation, manage all communication with HMRC and work to achieve the best possible outcome.
Learn more ›
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Estate Planning and IHT
Property portfolios form a significant part of many estates. We advise on the IHT implications of property ownership, gifting strategies, trust structures and the interaction between property tax and inheritance tax planning.
Learn more ›
Property tax advice

Get your property tax position properly reviewed

Whether you have one buy-to-let or a portfolio of ten, a clear picture of your tax position helps you make better decisions. Talk to us today - all enquiries are completely confidential.

📞 01372253100