Landlord glossary

Adjusted total income

Your income after reliefs, excluding savings and dividends, less the personal allowance. It is the third and least understood cap on the finance cost reduction.

Allowable expense

A cost of running the letting that reduces your taxable profit. Wholly and exclusively for the property business, and apportioned where there is private use.

Annual exempt amount

The slice of capital gain taxed at nil, now £3,000. It was £12,300 in 2022/23, so any sum you did a few years ago understates the bill.

Assured shorthold tenancy

The standard private tenancy in England. Almost every deadline on a landlord checklist attaches to the day it starts or the day the deposit is taken.

Balancing charge

Where you claimed capital allowances on something and later sell it, the proceeds come back into profit, capped at what you claimed. Rare for residential landlords since the furnished holiday letting rules went.

Base cost

What the property cost you for capital gains: the price, the buying costs, and every capital improvement. Repairs are not in it, because they came off the rent at the time.

Basic rate reduction

What replaced the mortgage interest deduction. 20 per cent of the lowest of your finance costs, your property profits and your adjusted total income, taken off the tax rather than the profit.

Beneficial ownership

Who really owns the property, as opposed to whose name is on the title. It decides who is taxed on the rent, and for married couples it takes a Form 17 to depart from 50:50.

Capital expenditure

Money spent adding something rather than restoring it. Not deductible from rent, but it joins the base cost and reduces the gain when you sell.

Capital gains tax

Charged on the gain when you sell. Residential property is 18 per cent and 24 per cent, with only the unused part of your basic rate band getting the lower figure.

Deposit protection

A tenancy deposit must be in an approved scheme within 30 days of receipt, with the prescribed information served in the same window. Miss either and a section 21 notice is not valid.

Electrical Installation Condition Report

Required every five years, and given to the tenant within 28 days of the inspection. One of the documents that blocks a section 21 if it was never served.

Energy Performance Certificate

Valid ten years, served at the start of the tenancy. The minimum rating a property can be let at has been rising, so a poor rating is a works bill waiting.

Finance costs

Mortgage interest, interest on a loan to buy furnishings, arrangement fees and early repayment charges. None of them are deductible, and all of them feed the basic rate reduction.

Form 17

The election that lets a married couple be taxed on their actual beneficial shares rather than 50:50. It must reach HMRC within 60 days and only applies from the date it is made.

Furnished holiday letting

A regime with capital allowances and better capital gains treatment, abolished from 6 April 2025. Short lets are now taxed like any other property business.

Gross rent

The rent before any expense at all, and before the agent takes their fee. It is the figure Making Tax Digital measures, which is why a heavily mortgaged landlord can be in scope with almost no profit.

Ground rent

Payable by a leaseholder to the freeholder. Deductible against the rent, and worth checking for escalation clauses before you buy.

House in multiple occupation

A property let to three or more people forming more than one household. Usually licensable, with room sizes and amenity standards attached to the licence.

Improvement

Work that adds something not there before. It waits until you sell and is then relieved at 18 per cent or 24 per cent, rather than at your income tax rate now.

Joint ownership

Where two or more people own a property, each is taxed on their share of the rent. Married couples are 50:50 by default, whatever the deeds say.

Landlord insurance

Cover written for a let property. Ordinary home insurance does not cover letting, and a claim on the wrong policy is usually the moment you find out.

Late payment interest

Statutory interest on a late commercial debt, at base rate plus eight per cent, plus a fixed sum by size of invoice. It applies between businesses, so it covers a corporate tenant rather than an individual one.

Licensing

Councils can require a licence for houses in multiple occupation and, under selective licensing, for ordinary lets in designated areas. It varies street by street.

Loan to value

The mortgage as a share of the property value. It decides the rate you are offered, and under the finance cost restriction it also decides how badly section 24 hits you.

Making Tax Digital for Income Tax

Four quarterly updates and a final declaration in place of one return. Property income counts, from £50,000 of gross income in 2026, £30,000 in 2027 and £20,000 in 2028.

Payments on account

Two instalments toward next year's tax, due 31 January and 31 July. None are due if the liability is under £1,000 or if 80 per cent was taxed at source.

Personal allowance

The first £12,570 of income taxed at nil, withdrawn by £1 for every £2 above £100,000. Rent counts toward that £100,000 before the interest comes off.

Prescribed information

The details of the deposit scheme and how to get the deposit back, served on the tenant within 30 days. Protecting the deposit without serving this is still a failure.

Private residence relief

Removes the gain attributable to any period the property was your only or main home, plus the final nine months of ownership.

Property allowance

The first £1,000 of property income can be received tax free, but only instead of claiming expenses. Worth it where your costs are smaller than that.

Property business

All your UK properties taken together. Profits and losses are pooled across them, and an overall loss carries forward against future property profits rather than against a salary.

Rent a Room

Up to £7,500 of income from furnished accommodation in your only or main home, tax free. Halved to £3,750 each where two people share it.

Repair

Restoring what was there, including with the modern equivalent. Deductible from rent in the year you pay for it.

Replacement of domestic items relief

A deduction for replacing furniture, appliances and kitchenware. Capped at the cost of a like for like item, and not available on the first set.

Section 21

The no-fault possession notice. It cannot be served at all if the deposit, the EPC, the gas record or the How to Rent guide were not dealt with properly.

Section 24

The finance cost restriction. Interest is not deducted from rental profit; you get a basic rate reduction against the tax instead, which is why a higher rate landlord can owe more than the property made.

Selective licensing

A council scheme requiring a licence to let ordinary property in a designated area. Letting without one where it applies is an offence and can trigger a rent repayment order.

Stamp Duty Land Tax

Charged on the purchase price in England and Northern Ireland. An additional dwelling carries 5 per cent on top of every band, including the nil rate band.

Surcharge

The extra 5 per cent on an additional dwelling, and a further 2 per cent for a non-resident buyer. It does not apply below £40,000.

Void

A period with no tenant. It costs more than the lost rent, because the mortgage, insurance and standing charges continue and the council tax usually becomes yours.

Wear and tear allowance

A flat ten per cent deduction on furnished lets, abolished in 2016. It was replaced by replacement of domestic items relief, which only pays out when you actually spend.

Yield

Rent as a share of what the property is worth. Gross yield ignores every cost. Net yield, on everything you put in, is the one that tells you anything.