Once your PRO trial is over you can continue using Landlord Studio GO completely free.
By continuing you agree to our Terms & Conditions.
Tax saving strategies are ways for landlords to minimise tax on rental income, optimise cash flow, and increase long-term profitability.
Written by
Ben Luxon
PUBLISHED ON
Feb 28, 2025
There are numerous factors to becoming a successful buy-to-let landlord. One that often gets overlooked is tax efficiency. Simply put, tax efficiency strategies are ways for landlords to avoid tax on rental income, optimise cash flow and increase long-term profitability.
As a landlord trying to succeed in 2025’s competitive market, it’s only natural to ask yourself the question ‘how can I avoid paying tax on rental income’, so first things first: do not feel bad about it.
Whilst they are not the most glamorous part of being a landlord, the tax-saving strategies outlined in this article can make a huge difference to your bottom line, and even mean the difference between success and failure as a property investor. So without further ado, let’s take a closer look at how to avoid paying tax on rental income in 2025.
The very first tip for landlords and investors is to make sure you have systems and tools in place to accurately track all of your allowable expenses. These should normally include:
With Making Tax Digital (MTD) for IT expanding to landlords earning over £50,000 per year in 2026, it’s now mandatory to keep digital records and file quarterly tax returns. This means landlords must ensure all income and expenses are tracked accurately throughout the year to avoid penalties.
How Landlord Studio Helps: With Landlord Studio, landlords can automate income and expense tracking, store receipts digitally, and generate tax reports instantly, making tax time effortless.
Find out more about landlord allowable expenses here
Over recent years, there has been a push by many investors to set themselves up as limited companies. This can be a great way to reduce your tax bill, and by investing through a company, you may gain benefits such as:
New government discussions in 2025 indicate potential future restrictions on limited company benefits for landlords.
Further Reading: We take a look at the pros and cons of investing in property through a limited company in this article.
If you or your spouse are in a lower tax bracket, then it might make sense to transfer ownership of rental properties to the lower earner.
Capital Gains Tax was increased to 24% for higher-rate taxpayers in late 2024, so this method is now even more valuable for landlords looking to sell in the future.
One expense that landlords often forget about is the home office allowance. Even if you only own one rental property, you are entitled to claim business expenses associated with a home office.
Landlords who manage multiple properties or spend significant time on admin may benefit more from the actual expense method rather than the flat rate. Keeping accurate records is key.
Rental losses can be carried forward and offset against rental profits in future tax years. This means if you spend more on maintenance, renovations, or repairs in a single year, those losses can be deducted from your taxable income in following years.
Example Scenario:
From April 2016, the wear and tear allowance was replaced with the Replacement Domestic Items Relief (RDIR). This allows landlords to deduct the cost of replacing furniture or appliances with a like-for-like replacement.
This relief does not apply to upgrading furnishings or buying new items. It can only be used for replacing existing, worn-out items in the property.
Example: If a washing machine breaks, the cost of a new washing machine and disposal of the old one can be deducted from your rental income.
As of 2025, the government is reviewing allowances for landlords, and possible enhancements to RDIR may be introduced in future budgets to encourage rental property improvements.
For landlords facing large Capital Gains Tax (CGT) bills, one option is to convert a buy-to-let into a primary residence to qualify for Letting Relief.
If you live in the property before selling, you may be able to claim Private Residence Relief for the period of time you occupied it.
For example, if you owned the property for 10 years, rented it for 6, but lived in it for 4, you’d only pay CGT on 60% of the gains rather than 100%.
As of 2025, due to stricter CGT regulations, this strategy is becoming less viable unless landlords live in the property for a significant period before selling.
One of the biggest changes affecting landlords in 2025 is the reduction of the CGT allowance from £6,000 in 2023/24 to £3,000 per individual. This means that when landlords sell a rental property, they will face higher tax bills on any profits made.
Use Spousal Transfers: Transfers between spouses are tax-free, allowing you to double your CGT exemption.
Time Your Sales Wisely: If selling multiple properties, spread sales across different tax years to maximise allowances.
Reinvest in Energy-Efficient Properties: Some EPC improvement schemes may offer tax relief for landlords improving rental stock.
If you’ve tried all the above methods and you’re still wondering ‘how can I avoid paying tax on rental income’, one less obvious answer is to have your property regularly reassessed. This will help you get an updated value on your property, which can help strengthen your hand when it comes to talking to lenders. With exact data on how much equity you hold, as well as an accurate picture of your portfolio performance, you may be able to get lenders to reevaluate your loans, potentially reduce your interest rates, and even qualify for additional loans to increase your portfolio size.
As part of this, it’s essential to have accurate and detailed records of all of your income and expenses throughout the year. Using the Landlord Studio software, you can easily digitise receipts at the point of sale, record income and expenses in real-time using our bank feeds feature and intuitive mobile app, and instantly generate and share any of over 15 professional reports for advanced data insights into your finances.
If you’re considering how to avoid paying tax on rental income, the best way to save on your taxes as a landlord is to employ excellent property management and accounting software and to use a quality accountant and reliable tax advisor. With the right tools and knowledgeable advisors to assist you, you’ll be well on the way to minimising your overheads and maximising profits.
By using Landlord Studio’s property management and accounting tools, landlords can:
Create your free Landlord Studio account today and ensure your rental business is tax-efficient in 2025 and beyond.
.webp)
Landlord Studio is an easy to use MTD compliant property management and accounting software designed for UK landlords.
Track income and expenses, run reports,, find and prescreen tenants, manage property maintenance, and more.
.webp)