Landlords are losing hundreds of pounds each month by failing to make the most of available tax breaks, according to buy-to-let lender Paragon.

While most landlords are aware they can save tax by setting off mortgage interest against rental income, many are wasting other valuable allowances.

Landlords can deduct a number of other costs for tax purposes, in addition to mortgage interest. These include water rates, building insurance, service charges and even the transport costs of visiting properties.

Paragon Mortgages, the specialist buy-to-let lender, estimates that a typical landlord earning £12,000 a year in rent could spend up to £5,000 a year on these costs but claim back up to £2,000.

Research by Paragon found that huge numbers of landlords were unaware of the allowance, even though more than half had paid for qualifying improvements.

John Heron, managing director of Paragon, says it is vital that landlords take advantage of the allowances open to them, to maximise their investment returns.

“I’m sure when landlords take all of these costs into consideration it could generate a significant saving on their tax bill,” he says.

These savings are particularly valuable now, as landlords face sharply higher mortgage costs. Rents have been rising as demand for lettings has increased but many amateur landlords are still facing income shortfalls as mortgage costs have risen even faster.

The new "Understanding and Paying Less Property Tax for Dummies" guide by Property Tax Plus editor Steve Sims has a comprehensive list of expenses landlords can claim.