5 Common Self-Assessment Tax Mistakes Landlords Make

4 Minute Read - Updated February 2025

The landlord tax and the self-assessment time of year can be a stressful period for landlords. To make sure you don’t make any costly mistakes, watch out for the following five common errors made by landlords during their self-assessment:

Incorrect Petrol Allowance and Subsistence Costs

Landlords using their personal vehicle for business-related travel can claim mileage expenses. HMRC allows 45p per mile for the first 10,000 business miles per tax year, and 25p per mile thereafter. This mileage allowance covers fuel and vehicle wear and tear but does not include costs such as:

Landlord vehicle expenses
Insurance
MOTs
Repairs

What You Need to Do: Keep a mileage log recording all business-related travel. Ensure you separate personal mileage (such as school runs) from business-related journeys.

Subsistence Costs: Landlords can claim expenses incurred while performing landlord duties, such as meals when traveling for work. However, only light meals like sandwiches are allowed—not large restaurant meals with family or friends.

Home Office Costs: If you use a home office for managing rental properties, you can claim a £6 per week tax-free allowance without receipts. Additional home expenses, such as electricity and gas, can be claimed proportionally if you have evidence (e.g., bills and invoices).

Not Allowed: Household internet services cannot be claimed unless the connection is exclusively for business use.

Claiming for full Mortgage Interest

Since April 2020, landlords can no longer deduct mortgage interest from rental income. Instead, HMRC provides a 20% tax credit on the mortgage interest paid.

Key Mistakes to Avoid:

Claiming full mortgage interest as an expense (only the 20% credit applies).
Including mortgage capital repayments in expense claims (these are not deductible).
Landlord mortgage interest relief miscalculations

What You Need to Do: Ensure you only claim the allowable 20% tax relief and avoid including mortgage capital repayments in your tax return.

Claiming for Capital Expenses

Understanding the difference between capital and revenue expenses is crucial for tax returns.

Revenue expenses (deductible immediately):

Repairs and maintenance to keep the property in its existing condition
Painting, replacing carpets, or repairing appliances

Capital expenses (deductible only when you sell the property):

Structural improvements (extensions, loft conversions)
Upgrading a kitchen or bathroom significantly
Installing a new en-suite where one didn’t exist before
Landlord capital expenditure rules

Grey Areas:

Replacing wooden windows with UPVC? HMRC may now consider this a standard repair (revenue expense), rather than an improvement (capital expense).
Buying furniture for an unfurnished property? This is a capital expense, not deductible against rental income.

What You Need to Do: If unsure whether an expense is capital or revenue, consult an accountant to avoid incorrect claims.

Not Using a Deed of Trust

A Deed of Trust can help landlords legally adjust ownership percentages between co-owners to optimise tax liability. This is particularly beneficial for:

Married couples where one partner earns more and pays higher tax rates.
Joint property owners who wish to divide rental income unequally to reduce tax liability.
Property tax planning for landlords

What You Need to Do: If you jointly own property, consult a solicitor or tax professional to see if a Deed of Trust could benefit you under HMRC’s tax rules.

Claiming for Training Courses

HMRC distinguishes between capital and revenue training expenses:

Deductible training (revenue expense): Refresher courses on existing landlord knowledge.
Non-deductible training (capital expense): Courses that materially expand your knowledge (e.g., a first-time property investment course).

What You Need to Do: Ensure training expenses claimed are directly relevant to managing an existing rental business, not personal development.

Bonus Tip: Prepare for Making Tax Digital (MTD)

Making Tax Digital (MTD) for Income Tax will apply to landlords with income over £50,000 from April 2026 and £30,000 from April 2027.

What You Need to Do: Start using digital accounting software like Xero, QuickBooks, or FreeAgent to stay ahead of new HMRC requirements.

Final Thoughts

Tax rules for landlords can be complex, and mistakes can be costly. To avoid penalties:

Keep clear and detailed records of expenses and income.
Ensure you differentiate capital and revenue expenses correctly.
Use a professional accountant to optimise tax efficiency.
Prepare for Making Tax Digital (MTD) in advance.
Stay updated on landlord tax return mistakes.

Helpful Resources:

Check if you need to file a Self-Assessment Tax Return: HMRC Self-Assessment Guide
Use an online landlord tax calculator to estimate tax liability.

Need Expert Help? Contact a qualified landlord tax accountant today!

For any issues relating to landlord tax, we would most definitely advise consulting a professional. This could save you time and potentially money in the long run.

There are also many resources online such as an online landlord tax calculator which can help you calculate the amount of tax you owe on your rental income. As well as lots of information on landlord tax breaks, and landlord tax returns.