Landlords in the UK spent £12.8 billion on finance costs last year. Their expenses rose at more than double the rate of rental income over the past five years.
An analysis of HMRC data shows allowable expenses claimed by unincorporated landlords reached £34.75 billion in 2024-25. This sum equals nearly 59% of their rental income. Five years earlier, costs made up 47.8% of income.
Costs outpace rental growth
Declared expenses rose 56% since 2019-20, from £22.33 billion to £34.75 billion. Rental income increased by 26% during the same period, reaching £58.99 billion.
Finance costs, mostly mortgage interest, were the largest single expense. They accounted for 37% of total declared costs. About 1.15 million landlords reported residential finance expenses, with an average claim of £11,148.
Repairs and maintenance followed, totaling £6.41 billion. Nearly 2 million landlords claimed these costs, averaging £3,339 each.
Landlords earned £20,500 in rental income on average but spent £13,700 on allowable expenses. Higher borrowing costs and tax rules have widened the gap for individual landlords.
Since 2020, individual landlords have not been allowed to deduct mortgage interest when calculating taxable rental profits. They receive a 20% tax credit on eligible finance costs instead. Limited companies face no such restriction, leading to unequal tax treatment for similar properties.
Related: TAB backs London warehouse portfolio expansion
Many small landlords now pay higher effective tax rates. Some have moved properties into limited companies to keep full interest relief, though this adds administrative and legal expenses.
Policy pressure on landlords
Phil Shelley, chair of Hello Neighbour, said the sector houses a fifth of the UK population. It cannot keep absorbing costs rising at twice the rate of income. “Landlords are being asked to fund upgrades the country wants through a tax system that treats them worse than a company holding the same building,” he stated.
The government is pushing for higher energy efficiency standards in rental properties. Landlords must meet deadlines for insulation and heating system improvements or face penalties. Many argue the tax changes leave them with less money to invest in these upgrades.
HMRC noted total property income stayed “fairly consistent” in 2024-25, even as expenses climbed 11% in a single year. The mismatch shows landlords are bearing more financial burden, with little ability to raise rents in an already tight market.
Tenants may feel the effects through fewer available properties or slower improvements. If more landlords leave the market, competition for remaining rentals could push prices up, countering policy goals.
The data excludes landlords who have already exited the sector. The actual financial strain may be worse than the figures indicate.
To protect property value, landlords should regularly review their expenses and tax strategies.
