Buy-to-let property

Allowable expenses are deducted from rental income received to give the profit made on the property letting. This profit is then taxed at a rate based on whether it is held personally or via a limited company.

Individual buy-to-let ownership

Profit from property let by individuals must be reported to HMRC on their annual self-assessment personal tax return. It will be taxed at their marginal rate (although property income tax rates for individual landlords will rise from April 2027, along with a change in the ordering rules) of income tax dependent on the level of PAYE income:

• 20% at basic rate,
• 40% at higher rate
• 45% at additional rate

Individuals must keep full records of all rental income and allowable expenses throughout the year, in order to facilitate completion of the self-assessment.

You need to follow the requirements for Making Tax Digital for Income Tax if you are self-employed or a landlord from:

• 6 April 2026 if you have an annual business or property income of more than £50,000
• April 2027 if you have an annual business or property income of more than £30,000
• April 2028 if you have an annual business or property income of more than £20,000

Under MTD, landlords must keep digital records and use appropriate software for this and to submit the information to HMRC.

Limited company buy-to-let ownership

Income and allowable expenditure relating to the letting of property via a limited company must be reported in its annual year-end accounts and corporation tax return. Profits are subject to Corporation Tax (on a scale of 19%-25%, depending on profit).

All purchases of buy-to-let properties through a Limited Company are subject to a higher rate Stamp Duty Land Taxes (SDLT) surcharge of 5% which would usually apply to individuals purchasing a 2nd residential property. Purchases through a company in excess of £500K may be subject to 17% SDLT (unless the company is a qualifying property rental business) and the annual ATED charge (£4,600 for properties valued between £500k - £1m).

Full records of all rental income and allowable expenses throughout the year must be kept.

Capital gains

In either situation tax may be due to HMRC upon sale of the buy-to-let property. This is determined by the property value on the dates of its acquisition and sale.

Nasa Accountants can take care of the company accounting for a rental property, so if you think this may be an option for you then do not hesitate to contact your account manager to discuss your options