A looming tax change threatens to squeeze buy-to-let profits at a time when many landlords are still struggling with lost rental income in the wake of the pandemic.

The sector narrowly avoided another stamp duty tax rise last year, with the Chancellor pulling an increase to the investor surcharge, to four percentage points, from the most recent Budget at the last minute.

It comes after coronavirus and successive lockdowns hammered tenants and hit landlords’ rental income hard, creating a backlog of payments worth £360m, according to debt charity StepChange. 

Many landlords have also missed out on valuable tax breaks that could prevent a large chunk of their income ending up in the hands of HM Revenue & Customs. 

Reliefs on landlords’ income, such as being able to offset their mortgage costs against their tax bill, have gradually been withdrawn – and buy-to-let owners are now wondering whether the numbers still add up.

But there are a number of often underused reliefs still available which are now more important than ever. 

Make use of little-known expenses

Many landlords are unaware they may be able to claim back for expenses such as the cost of travelling between their rental properties and phone calls or texts sent in connection with a property. Those with a monthly contract can expense only the proportion of time they use it for business purposes. 

It is also possible to claim back the cost of subscriptions to property investment magazines, services and money spent on advertising the property, and legal and accountancy fees connected to the buy-to-let. As you can see using the calculator below, deducting these kinds of expenses from your income can make a big difference.

Zena Hanks of Saffery Champness, an accountancy firm, said: “It may seem like a hassle to keep track of these small expenses but doing so will make HMRC much more likely to accept them. It’s important to remember that offset expenditure must be wholly and exclusively for the purpose of the business.”