Landlords are paying out too much in tax because they and their accountants just do not know what business expenses they can claim.
Many landlords do not realise that every pound claimed as an expense reduces profits - which means they pay less tax.
Research by specialist landlord mortgage lender Paragon shows that more than one in 10 landlords (13%) are not claiming mortgage interest.
Meanwhile, a third of landlords don't claim management or letting agent fees and 55% of landlords not claiming for advertising costs incurred in letting their property.
Nigel Terrington, Paragon Group chief executive, said: "Good tax planning is key. How landlords implement, manage and run their tax affairs could have a major impact on landlords' property investments and their overall performance.
"Tax is a complex area. It's vital that landlords take advantage of the allowances open to them to maximise their return on investment."
Paragon questioned landlords about which of the following costs they are deducting from income tax with the following responses:
Expense
Landlords who Fail to Claim
Mortgage Interest
13%
Insurance
8%
Legal Fees
37%
Accountancy Fees
37%
Repairs
5%
Management Fees
33%
Wear and Tear
34%
Transport Costs
51%
Advertising
55%
Energy Efficiency
55%
Landlords can also save money with tax-effective ownership of properties - this can cut income tax and capital gains tax for married couples where one pays tax at 40% and the other at lower rate.
Other tax points to watch include maximising tax relief from trading losses in previous years and taking full advantage of capital allowances for houses in multiple occupation.
"I'm sure when landlords take all of these costs into consideration it could generate a significant saving on their tax bill," added Terrington.
