Total property income declared by unincorporated landlords in 2021-22 was £48.8bn, up from £46.3bn the previous year
HMRC figures showed that 2.79m landlords filed self assessment tax returns, with the overwhelming majority operating as individual buy to let landlords. There were also 300,000 partnerships with rental properties, earning £6.17bn.
The total income from UK property increased by 10% in the five years from 2017 to 2022, driven by an increase in average income to £16,700 and the number of landlords was up by 100,000.
The largest category of expense was finance costs, with £6.85bn being claimed in 2021-22. This accounted for 29% of all expenses claimed against UK property income by unincorporated landlords
The most common expenses claimed were rent, rates and insurance, and repairs and maintenance, with 67% of unincorporated landlords declaring expenses of these types with total claims up 6%.
While the majority of landlords buy property directly, research by Paragon Bank earlier this year indicated that three-quarters of landlords who intend to purchase a new rental property in the next year will use a limited company structure to reduce their tax bills.
Buying via a limited company structure offers a number of tax benefits. The main advantage is that limited companies can deduct mortgage interest from company income and pay corporation tax rates, rather than an individual landlord’s personal income tax rate. Depending on profits the corporation tax rate is 19% for those with profits under £50,000, rising to a standard rate of 25%.
In recent years, a raft of tax changes has increased the tax liabilities of individual landlords who rent out residential property.
The capital gains tax (CGT) payable was increased when the landlord sells a residential property (8% higher). A stamp duty land tax surcharge of 3% was also introduced on property purchases. Higher rate income tax relief for buy to let loan interest has also been removed.