If you’re a landlord in Cheltenham or the wider Gloucestershire area, chances are you didn’t get into property investment to battle HMRC paperwork. But failing to understand your tax responsibilities can be a costly mistake and one that many landlords make, often without realising it.
At Kapital Real Estate, we work closely with landlords across Cheltenham to help them build profitable, compliant property portfolios. And we’ve seen the same pitfalls time and time again.
Here are the top five tax mistakes landlords make and what you can do to avoid them.
- Misreporting (or Forgetting) Rental Income
It sounds obvious, but many landlords still underreport their rental income, either by accident or because they think “cash-in-hand” arrangements fly under the radar. They don’t. HMRC now cross-checks data from letting agents, deposit schemes, and even bank records.
Whether you’re renting out a single flat or managing multiple properties, every penny of rental income must be declared. That includes furnished holiday lets, HMOs, and even rent received from family members.
Top Tip: Keep a digital record of all rent received, and don’t forget to account for deposits, rent-free periods, and late payments.
- Confusing Repairs with Improvements
Not all property expenses are treated equally. One of the biggest tax slip-ups landlords make is claiming capital improvements as repair costs.
- Repairs (like fixing a leaking tap) are deductible against income tax.
- Improvements (like adding an en-suite bathroom) are capital costs, only deductible when you sell.
Mixing the two could lead to inaccurate returns and possible penalties. Speak to a tax advisor if you’re unsure, especially when carrying out major refurbishments.
- Overlooking Allowable Expenses
Many landlords miss out on perfectly legal deductions that could reduce their tax bill. This includes:
- Letting agent fees
- Mortgage interest (subject to finance cost restrictions)
- Buildings and contents insurance
- Council tax and utilities (if you pay them)
- Accountancy fees
- Travel to and from your rental property
In a competitive market like real estate in Cheltenham, squeezing every bit of efficiency out of your portfolio matters. These small savings can add up.
- Ignoring Section 24 Changes
Since the introduction of Section 24, landlords can no longer deduct all of their mortgage interest from their rental income. Instead, you get a basic rate tax credit of 20%. Higher-rate taxpayers are especially impacted.
If you haven’t reviewed your property structure recently, you could be paying far more tax than necessary.
Have you considered:
- Transferring property to a spouse in a lower tax bracket?
- Holding property in a limited company structure?
- Offsetting losses from previous years?
If not, now’s the time to revisit your setup.
- Forgetting to Plan for Capital Gains Tax (CGT)
When it comes time to sell a property, many landlords are caught off-guard by their Capital Gains Tax liability. Selling a buy-to-let isn’t like selling your main home, CGT applies, and the bill can be significant.
Common mistakes include:
- Not using your annual CGT allowance
- Failing to track and deduct legitimate capital costs
- Missing deadlines for reporting and paying CGT (currently 60 days from sale)
With property prices in Cheltenham rising, CGT planning is no longer optional, it’s essential.
Why This Matters More Than Ever
The real estate landscape in Cheltenham is growing more sophisticated, and tax compliance is following suit. Whether you’re managing a single flat or building a long-term portfolio, understanding your tax obligations is key to protecting your profits and your peace of mind.
Tax doesn’t have to be complicated if you plan ahead. At Kapital Real Estate, we don’t just manage properties, we help landlords manage smarter. That means:
- Educating clients about tax-efficient ownership
- Connecting you with trusted local accountants and advisors
- Structuring portfolios for long-term growth and compliance
If you’re a landlord in Cheltenham and unsure whether your tax affairs are in good shape, we’re here to help.
Let’s make tax one less thing to worry about.
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