Landlord Tax Saving Guide 2026

1. How Rental Income Is Taxed in 2026

Your rental income is taxed on net profit, excluding mortgage interest. If you are a basic rate taxpayer (earning less than £50K), it does not affect you significantly. However, it does affect higher-rate taxpayers.

For example: your rental income is £8,000, expenses are £3,000, and mortgage interest is £2,000. Your taxable rental profit will be calculated based on £5,000 (£8,000 – £3,000).

If you are a basic rate taxpayer, you can claim full mortgage interest relief at 20%. However, if you are a higher-rate taxpayer (40%), you effectively only receive 20% tax credit relief on the mortgage interest. In this example, you would receive relief on £2,000 at 20%, meaning £400 tax reduction only. If you are an additional-rate taxpayer (45%), the impact is even greater.

Many landlords overpay tax simply because they fail to structure their finances and property business correctly. Working with multiple landlords, we have noticed that many fail to claim mortgage product fees, which are often expensive and fully claimable.

A professional property tax accountant will review:

•   Mortgage interest and broker fees – you can claim both mortgage product fees and interest expenses.
•   Repairs vs capital improvements
•   Capital allowances
•   Replacement of domestic items
•   Insurance, letting agent fees, and compliance costs

2. Claim Every Allowable Expense

Most landlords forget to claim allowable expenses.

Common deductible expenses include:

Mortgage broker fee and product fee – For example, if you paid £3,000 as a product fee, you can claim it as long as it is treated as an incidental cost. Incidental costs include loan fees, commissions, guarantee fees, and fees connected with the security of a loan. We have noticed most landlords do not claim product and broker fees and end up paying more tax. This is a highly technical area, so we recommend speaking to a property tax expert for professional advice.

• Property repairs and maintenance – Yes, you can claim all repair and maintenance costs. Working with multiple landlords, we have noticed they often forget to claim Gas Safe certificate costs and essential repair expenses. You may also claim capital allowances in certain situations if improvements qualify under replacement rules.
• Letting agent fees – Yes, you can claim them all, including VAT.
• Insurance premiums – You can claim both property insurance and landlord insurance against your rental income.
• Accountancy fees – Yes, you can claim both accountancy and tax advisory fees.
• Advertising costs – If you advertise on platforms such as Zoopla or OpenRent, those costs are deductible.
• Replacement of domestic items – Yes, you can claim replacement costs (for example, replacing a boiler, washing machine, or kitchen appliances), provided they qualify under replacement rules.

Transfer to Your Partner

You can save thousands by transferring rental income to your spouse. If you are a married couple, you can transfer the beneficial interest to your partner without necessarily changing the legal title. HMRC allows this if you complete Form 17 and draft a simple Deed of Trust.

We strongly recommend speaking to a property tax advisor before taking this step to ensure it is structured correctly.

3. Consider Incorporation Carefully

Some portfolio landlords benefit from operating through a limited company, especially where mortgage interest relief is restricted.

However, incorporation may trigger:

•   Stamp Duty implications
•   Capital Gains Tax considerations (Check our capital gains tax calculator here.)
•   Financing restrictions

Some landlords benefit from setting up a partnership and running it for approximately two years before incorporation to potentially claim Stamp Duty relief. At Tax Care, we assist our clients with restructuring their property business properly.

4. Plan for Capital Gains Tax (CGT)

If selling in 2026:

•   Review the timing of disposal
•   Consider transferring ownership between spouses
•   Use annual CGT exemptions efficiently

An experienced accountant for rental income can plan disposals in a tax-efficient way.

5. Prepare for Making Tax Digital (MTD)

MTD will require digital quarterly submissions.

Landlords should:

•   Maintain digital bookkeeping
•   Use compliant software
•   Reconcile monthly

We recommend proactive digital landlord bookkeeping to avoid penalties and ensure compliance.