Property investors could be paying thousands more in tax each year than necessary by failing to take advantage of legitimate tax reliefs, according to Lee Murphy, Managing Director of The Accountancy Partnership.
Murphy says tighter margins and frequent changes to property taxation mean landlords need to be “more clued up” on how the system works to stay profitable — without crossing any legal lines.
“Paying less tax isn’t about dodging the rules — it’s about understanding them and using them to your maximum advantage,” he said. “Many investors don’t fully understand the laws, so it’s incredibly easy to pay over the odds.”
Here are Murphy’s five top tips for staying tax-efficient as a property investor:
Choose the right ownership structure
Whether property is owned personally or through a limited company can make a significant difference to the annual tax bill. Limited companies may benefit from lower corporation tax rates and still offset mortgage interest, while personal ownership could be more efficient for smaller portfolios.
Claim every allowable expense
Many landlords miss legitimate deductions such as maintenance, cleaning fees, letting agent charges — and even travel costs to and from properties. “Those pennies of petrol can quickly turn into pounds,” Murphy noted.
Use capital allowances
Landlords with commercial property can claim allowances on fixtures, fittings, and equipment, reducing taxable profits. Murphy says this is “hugely overlooked” despite the potential savings.
Maximise allowances and exemptions
Personal allowances, capital gains tax exemptions, and the Marriage Allowance can all reduce tax liabilities. Couples can transfer unused allowances, and timing property sales across tax years can help minimise CGT.
Plan for the long term
Tax rules change frequently, so investors should monitor fiscal announcements and prepare for potential shifts in CGT, inheritance tax, and property reliefs. “A long-term plan is far more effective than short-term fixes,” Murphy advised.
Murphy recommends regular reviews with an accountant to ensure property portfolios are structured in the most tax-efficient way, and to avoid missing out on allowances that could significantly improve profitability.
