10 Finance Tips Landlords Need to Know

10 Finance Tips Landlords Need to Know

Becoming a landlord is one of the most lucrative and rewarding things you can do.

10 finance tips for landlords

But when you’re dealing with property, things can get complicated. And managing your money is no exception.

So we’ve put together 10 tips for new landlords – to give you the jump-start you need to stay on top of your finances and protect your investment.

Ready? Let’s get started…

Before You Let Your First Property

1. Talk to your mortgage company

If you bought your house as a home for yourself, you’re probably on a residential mortgage. And that means you might not have permission to let out your property as a landlord.

So if you’re planning to become a landlord, the first step is to talk to your mortgage provider – to either get the permission you need, or to switch to a different type of mortgage.

(In some cases, you might already have that permission. So check the terms and conditions of your mortgage carefully – and don’t be afraid to ask a professional for help!)

2. Get insurance made for landlords

10 finance tips for landlords

As a landlord, there’s no legal obligation for you to have insurance. (Although it’s often something that your mortgage lender requires – and it’s definitely good common sense!)

But there’s one big difference you need to know if you’re planning to start letting out a property:

A residential insurance policy won’t cover you for rental activities.

You’ll need a specific insurance policy that’s made for landlords. That could include liability or contents insurance – but as a bare minimum, you’ll need to get landlord’s buildings insurance to help protect your investment.

3. Create a separate bank account

This one isn’t essential – but it’s always a good idea to keep your personal finances separate from your business finances.

It makes life easier when you need to sort out your tax returns (and it might even help if your accounts come under scrutiny in the future!)

4. Register for Self-Assessment Tax Returns

Depending on your income, you might not have to report your earnings straight away. But we always recommend that you get started early with completing a tax return.

With your income formally recorded on a tax return, it makes things easier if you ever need to re-mortgage your property.

(And if you’re unlucky enough to make some losses, then the record of those losses can be rolled forward into your next tax return – which could save you tax in the future.)

Understanding Your Expenses as a Landlord

5. Get an idea of your allowable costs

Just like any other business, you’ll only be taxed on the profits you make as a landlord. And that means the business expenses you claim can help to reduce the amount of tax you pay.

So how do you know which expenses count?

In general, any expense that’s directly related to the letting of your property is an allowable expense.

10 finance tips for landlords

That usually means things like:

  • Landlord’s insurance
  • Gas Safety Certificates
  • The fees you pay your letting agencies
  • Your property rates
  • Utilities (such as gas, electricity, or water)
  • The fees you pay your accountant
  • And any legal fees related to the tenancy.

It’s a long list. And if you’re a new landlord, you might not always be sure which of your costs are allowable expenses. So if you’re ever in doubt, just ask your accountant – that’s what you pay them for!

6. Beware of improvements to your property

If your property gets damaged and needs maintenance or repair, these costs can count as an allowable expense.

But you need to be careful here:

Maintenance and repair will only count as an allowable expense if you replace things like-for-like.

If you replace something in your property with an upgrade or improvement, this counts as a capital expense – and if you try to deduct it from your rental profits, you could get in trouble.

In most cases, the difference should obvious. But sometimes, it’s not so clear:

Let’s say your kitchen has a damaged laminate worktop, and you need to replace it. If you replace it with another laminate worktop, that’s a like-for-like change – and it’s an allowable expense.

But if you replace a laminate worktop with a granite worktop, that counts as an improvement – and you won’t be allowed to deduct that cost from your rental profits.

Luckily, you’ll still be able to use that cost to help you out later. The cost of improvements can be deducted from your capital gains tax when you sell the property (so unfortunately, you’ll have to wait a while to see any benefit!).

7. Watch out for mortgage interest

In previous years, landlords were able to deduct their mortgage expenses from their rental income.

10 finance tips for landlords

But as of April 2020, the laws have changed – and mortgage costs are no longer a rental expense.

Instead, you’ll be able to get a tax credit based on 20% of your mortgage interest repayments.

So why should that matter?

For some landlords, this could mean they get pushed into a higher tax bracket (and they could end up paying more tax than before).

Thinking About the Long Term

8. Record your mileage when you travel as a landlord

Every time you travel for your tenancies, you’re racking up costs. And while each journey might seem small, they can add up to a sizeable expense over a long enough time.

Luckily, calculating your mileage costs is easy. When you’re travelling for something connected to your properties, you can claim:

  • 45p per mile for the first 10,000 miles
  • And 25p for every mile after that.

But just like any other business expense, you need to be able to prove it.

So for every journey that you’re claiming as an expense, you’ll need to keep a record of:

  • The date of the journey
  • Where you were travelling to
  • Where you were travelling from
  • And the number of miles travelled.

9. Keep your receipts for every rental expense

This one is crucial. And unfortunately, lots of new landlords seem to forget it.

Whether you’re buying new furniture or paying your accountant, you should always ask for a receipt – and you should keep every receipt you get.

You might not need to show your receipts with every tax return you file. But if HMRC ever decides they want to investigate, you’ll be glad you’ve got the documentation ready to prove every claim you’ve made.


Remember those improvements to your property that you couldn’t claim as a rental expense?

This is where they come into play.

At some point in the future, you might want to sell your property. And when that happens, you’ll have to pay capital gains tax on the profit you’ve made between buying the property and selling it later.

But just like other taxable profits, you can deduct certain costs to help reduce the amount of tax you pay.

In most cases, this means you can deduct the costs of things like:

  • Estate agency fees
  • Solicitors’ fees
  • And any improvements or upgrades to the property.

(Which means it’s important to keep all your receipts – not just for your agency fees, but also for every improvement and upgrade you make!)

Ready to get started as a successful new landlord?

Owning a property isn’t always easy. (And renting to tenants can make things even more complicated!)

But you don’t have to do it alone…

We’ve been helping landlords and homeowners to stay on top of their finances for years – and we’re always on hand to give out advice or answer any questions our landlords have.

So if you’re a new landlord looking to get started (or you’re a busy landlord who needs a little extra help), send us a message or give us a call – we’ll be happy to talk about everything we can do.

Carrie Stokes Chartered Accountant

Carrie Stokes Chartered Accountant

I work with directors of limited companies in Shropshire, Staffordshire and the West Midlands giving them a clear and up to date financial picture of their business that they understand. Looking at the numbers, what they mean and how they can be improved to grow their business.

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