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Buy to let property remains one of the most popular wealth-building strategies in the UK, but the tax landscape for landlords has changed dramatically over the past decade. The removal of full mortgage interest relief, higher Capital Gains Tax rates on residential property, and the gradual abolition of the Furnished Holiday Let regime have all shifted the economics of property investment in ways that demand proactive tax planning.
Whether you own a single rental property or a growing portfolio, understanding the current rules and structuring your affairs correctly can make a substantial difference to your net return. YRF Accountants provides specialist buy to let tax planning for landlords across Bolton, Manchester, and Bury. This guide covers the key planning opportunities available to you in 2026/27.
The Mortgage Interest Relief Change: Where Landlords Still Lose Money
Before 2017, individual landlords could deduct 100% of mortgage interest costs from their rental income before calculating tax. That relief has now been fully replaced by a 20% tax credit — meaning basic rate taxpayers are broadly unaffected, but higher rate and additional rate taxpayers pay significantly more.
In practice, this means a higher rate taxpayer with a highly leveraged buy to let portfolio may show a taxable rental profit even when their actual cash return is modest or even negative, simply because the mortgage interest is no longer fully deductible. If this describes your situation, portfolio restructuring and planning should be a priority — not a future consideration.
Allowable Expenses: What You Can and Cannot Deduct
Many landlords either under-claim or misclassify expenses, both of which cost money. Here is a clear breakdown of what is and is not allowable against rental income in 2026/27:
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Item
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Allowable Against Rental Income?
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Notes
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Letting agent fees
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Yes
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Fully deductible
|
|
Accountancy fees
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Yes
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Fully deductible
|
|
Buildings and contents insurance
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Yes
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Fully deductible
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|
Mortgage interest
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Tax credit only
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20% credit for individuals; full deduction in limited companies
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|
Repairs and maintenance
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Yes
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Like-for-like repairs only, not improvements
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Capital improvements
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No
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Deductible against CGT on disposal, not rental income
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Replacement of domestic items
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Yes
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Replacement cost only, not initial purchase
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Ground rent and service charges
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Yes
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Fully deductible for leaseholders
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Utility bills (if landlord pays)
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Yes
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Fully deductible if included in rent
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Travel to inspect or manage property
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Yes
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Actual cost, documented
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Should You Hold Buy to Let Property in a Limited Company?
One of the most significant planning questions for buy to let landlords in 2026/27 is whether to hold property personally or through a limited company. There is no single right answer, but the key factors favour incorporation for landlords who:
- Pay Income Tax at the higher or additional rate (40% or 45%)
- Have significant mortgage borrowing, making the 20% interest credit particularly punishing
- Are building a portfolio for the long term rather than planning a near-term exit
- Want to retain profits within the company rather than drawing them as income
Inside a company, mortgage interest remains fully deductible against Corporation Tax, profits are taxed at 19%–25% rather than up to 45% and retained profits can be reinvested or drawn via dividends at a time and rate that suits you.
However, incorporation is not cost-free. Transferring existing properties into a company typically triggers Stamp Duty Land Tax and Capital Gains Tax on the transfer, which can be prohibitive for established portfolios. For new purchases, the calculation is cleaner. YRF Accountants models both scenarios against your specific income, borrowing, and long-term objectives before any recommendation is made.
For a comprehensive overview of how we support landlords with structuring decisions, see our Specialist Accounting for Landlords page.
Capital Gains Tax on Buy to Let Property: 2026/27 Rates
When you sell a buy to let property, any gain above the Annual Exempt Amount is subject to Capital Gains Tax. In 2026/27 the key figures are:
- Basic rate taxpayers: 18% on residential property gains
- Higher and additional rate taxpayers: 24% on residential property gains
- Annual CGT Exempt Amount: £3,000 per individual in 2026/27
- Reporting and payment deadline: 60 days from completion for UK residential property
Planning the timing of a disposal can meaningfully reduce the CGT bill. If your income varies year to year, selling in a year when other income is lower, using a spouse or civil partner's Annual Exempt Amount, or spreading a disposal across two tax years can all reduce the effective rate paid.
For a deeper look at CGT on property disposals, read our guide: Selling a Second Home: CGT Rules You Need to Know.
Self-Assessment and Rental Income: What Landlords Must File
If your gross rental income exceeds £1,000 per year, you must register for and submit a Self-Assessment tax return to HMRC, declaring all rental income and allowable expenses. Making Tax Digital for Income Tax (MTD ITSA) will apply to landlords with income above £50,000 from April 2026, and above £30,000 from April 2027, requiring quarterly digital reporting rather than a single annual return.
If MTD applies to you and you have not yet spoken to your accountant about compatible software and your record-keeping obligations, the time to act is now.
Our Taxation Services cover Self-Assessment filing, rental income tax returns, and MTD preparation for landlords across Bolton and Manchester.
Frequently Asked Questions: Buy to Let Tax Planning
Not directly. Since April 2020, mortgage interest relief has been replaced with a 20% tax credit for individual landlords. Higher and additional rate taxpayers bear the greatest cost from this change, as relief is now capped regardless of their marginal tax rate.
For higher rate taxpayers with multiple properties, a limited company can offer significant tax advantages, including full mortgage interest deductibility and Corporation Tax rates of 19–25%. However, the decision depends on your existing portfolio, personal income, and long-term exit strategy, and should be modelled individually.
Allowable expenses include letting agent fees, accountancy fees, ground rent and service charges, insurance, and the cost of repairing or maintaining the property. Capital improvements (such as an extension) are not deductible against income but may reduce Capital Gains Tax on eventual sale.
When you replace a furnished item such as a sofa, bed, or white goods, you can claim the cost of the replacement item as a deductible expense. You cannot claim for the initial purchase of furnishings, only replacements of like-for-like quality.
In 2026/27, gains on residential property sold by individual landlords are taxed at 18% (basic rate) or 24% (higher rate). Limited company disposals are subject to Corporation Tax rather than CGT. Private Residence Relief can apply if the property was at any point your main home.
Yes. If your rental income exceeds £1,000 per year (the property allowance threshold), you must register for and submit a Self-Assessment tax return, declaring all rental income and allowable expenses.
Yes. YRF Accountants provides specialist landlord tax planning for buy to let investors across Bolton, Manchester and Bury, covering income tax, CGT, portfolio structuring, and Self-Assessment filing.