For many people, becoming a landlord is not something they ever planned to do. They may have moved to a new home but decided to keep their previous property, or inherited a house or flat from a family member and opted to rent it out.
Whatever the reason, accidental landlords now make up a significant proportion of Scotland’s private rented sector. The 2024 Voice of the Landlord Survey Scotland found that around one in four landlords could be classified as accidental landlords – people who entered the rental market without initially intending to become property investors.
There can be clear attractions to retaining a property in these circumstances. An inherited flat, for example, may have avoided many of the upfront costs associated with buying an investment property, such as Land and Buildings Transaction Tax (LBTT) and the Additional Dwelling Supplement (ADS).
Letting the property can therefore provide an additional income while also offering the potential for long-term capital growth, particularly in areas where property values have historically performed well.
However, rental income is not the same as profit. Before letting a property, owners need to account for costs including letting and management fees, insurance, mortgage payments, maintenance and the certificates required to let a property legally. Those considering an HMO will also need to factor in additional licensing requirements.
Maintenance is another cost that can be easily overlooked by someone new to being a landlord. Properties naturally deteriorate over time, while unexpected problems such as a leaking roof or broken boiler can quickly wipe out several months of rental income. Setting aside money for repairs and having appropriate landlord insurance can help manage these risks.
The tax position also needs to be understood from the outset. Rental income generally needs to be declared through a tax return when a property is let personally, with the precise position depending on the individual’s circumstances, income and allowable expenses. Additional income could also push them into a higher tax band – something they may not have anticipated when deciding to let the property.
There may be further tax implications if the property is eventually sold, including Capital Gains Tax depending on the situation. Where a property is held through a company, the position can be different again, with corporation tax potentially applying to profits and further personal tax considerations when money is taken from the business.
Alongside the financial considerations, landlords also face new administrative requirements. From April 2026, landlords with qualifying rental income above £50,000 are required to use Making Tax Digital for Income Tax, with the threshold falling to £30,000 from April 2027 and £20,000 from April 2028. Those within scope will need to keep digital records and send quarterly updates to HM Revenue and Customs.
For anyone considering becoming a landlord, the starting point should therefore be a realistic assessment of the property's likely income, costs and tax position. Speaking to an accountant can help establish whether retaining the property is financially viable and ensure the owner understands their obligations from the outset.
For many accidental landlords, retaining the property can be a practical way to generate an additional income while holding an asset with potential for long-term growth. But making the most of that opportunity requires careful consideration of the responsibilities involved.
Ultimately, for those who unexpectedly find themselves in the private rented sector, taking the time to assess the costs, tax implications and responsibilities from the outset can help ensure the property works as a sustainable investment rather than simply generating rent.