Top 5 things to consider when letting a residential property

Letting out a residential property can be an attractive way to generate additional income, diversify your asset base, or make efficient use of a property you no longer occupy. However, becoming a landlord brings with it a range of tax, legal and estate‑planning considerations.

We help clients navigate these complexities to ensure their property decisions are structured tax‑efficiently and aligned with wider personal and family goals. Below are the top five factors to consider.

1. Income Tax and ownership structure

Rental income is chargeable to Income Tax, and the way ownership is structured can significantly affect the tax position. For couples, it may be beneficial to hold the property in unequal shares to maximise lower‑rate tax bands, but this must be supported by the correct legal documentation such as a declaration of trust and Form 17 where applicable. Reviewing your ownership structure before letting the property can ensure income is allocated in the most tax‑effective way.

2. Capital Gains Tax (CGT)

If the property has increased in value, you may face CGT when you eventually sell it. Lettings relief is now very restricted, so landlords must plan carefully—particularly where the property has previously been a main residence. We regularly advise on strategies to mitigate CGT, including timing of disposals, joint ownership planning, and the tax implications of gifting property interests to family members.

3. Inheritance Tax (IHT) and estate planning

Residential property is often one of the most valuable assets in an estate, so understanding the IHT implications is essential. Gifting property can trigger immediate and longer‑term tax consequences, and care is needed to avoid traps such as gifts with reservation of benefit. At Kreston Reeves, our legal and tax teams work together to ensure Wills are structured to maximise allowances, including the residence nil‑rate band, and to align property decisions with wider family planning.

4. Legal documentation and landlord obligations

Before letting a property, landlords must comply with a wide range of legal requirements, including tenancy agreements, deposit protection, safety certifications, and energy performance standards. These obligations change frequently, so obtaining up‑to‑date advice is key. Working with as reputable letting agent can be key to ensure you do not breach any regulatory rules.

5. Long‑term planning: Trusts, gifting and succession

Property can be held personally, jointly, in partnership, or via trusts or corporate structures. Each comes with its own tax and legal implications. If your longer‑term intention is to pass wealth to children or protect assets, early planning is vital. We advise on trusts, co‑ownership arrangements, and wider succession strategies to ensure long‑term goals are achieved tax‑efficiently.

If you’re considering letting out a residential property and would like advice, please do get in touch with one of our experts.