Landlord Tax Rules Explained (2025 Edition)
Navigating the world of property rental can be complex—especially when it comes to tax. If you’re a landlord in 2025, staying on top of current tax rules is essential to ensure compliance and maximize your profits. Here’s a quick breakdown of the key updates and considerations.
1. Rental Income Remains Taxable
All rental income must be declared to HMRC. This includes payments for rent, utility bills paid by tenants, and any other services you charge for. Remember, you’re taxed on your profit—not your total income—so allowable expenses still play a crucial role.
2. Mortgage Interest Relief
The phased-out mortgage interest tax relief is now fully replaced by a 20% tax credit. You can no longer deduct mortgage interest from your rental income; instead, you receive a basic-rate credit on your tax bill.
3. Making Tax Digital (MTD) Expansion
From April 2025, Making Tax Digital rules extend to landlords earning over £10,000 in gross rental income annually. This means you’ll need to keep digital records and submit quarterly updates to HMRC using approved software.
4. Capital Gains Tax (CGT) Adjustments
If you sell a rental property, you’ll likely pay Capital Gains Tax. In 2025, CGT rates remain at 18% for basic-rate taxpayers and 28% for higher-rate ones. However, the annual exempt amount has been reduced again, making strategic timing and planning even more important.
5. Allowable Expenses
Common deductible expenses include:
- Letting agent fees
- Maintenance and repairs (not improvements)
- Insurance
- Council tax and utility bills (if paid by you)
- Legal and accountancy fees
Always keep receipts and accurate records to back up your claims.
Final Thoughts
Tax rules for landlords in 2025 continue to tighten, particularly with the MTD rollout and reduced CGT allowances. Staying informed and possibly consulting a tax professional is more important than ever. With smart planning, you can stay compliant and protect your profits.
