Landlord tax: how UK rental income is taxed (2026 to 2027)

Tax is on your profit, not your rent

Your profit is your rental income minus the expenses or allowances you can claim. Rental income includes the rent and any payments for things like furniture or services you provide. If you let more than one UK property, the profits and losses are added together into one figure for your property business. Overseas property is kept separate. Source: GOV.UK: work out your rental income.

Your profit is added to your other income (wages, pension, self-employment) and taxed at your usual Income Tax rates.

Source: GOV.UK: Income Tax rates and Personal Allowances. Your Personal Allowance falls by £1 for every £2 of adjusted net income over £100,000. Scotland has different rates and bands.

Allowable expenses

GOV.UK lists allowable expenses for residential lets as day-to-day running costs, such as:

• letting agents' fees
• legal fees for lets of a year or less, or for renewing a lease for less than 50 years
• accountants' fees
• buildings and contents insurance
• maintenance and repairs (but not improvements)
• utility bills, rent, ground rent, service charges and Council Tax, if you pay them
• services you pay for, like cleaning or gardening
• other direct costs, like phone calls, stationery and advertising

Capital costs, like buying a property or renovating beyond repairs, are not allowable. You may be able to claim replacement of domestic items relief for things like beds, sofas, carpets and fridges. Source: GOV.UK: renting out a property, paying tax.

The £1,000 property allowance

The first £1,000 of your property income is tax-free. If you claim the property allowance, you cannot claim a deduction for your expenses. It suits landlords with small rental income or low costs.

GOV.UK says to contact HMRC if your property income is between £1,000 and £2,500 a year. You must report it on a Self Assessment tax return if it is more than £2,500 after allowable expenses, or £10,000 before allowable expenses. Sources: GOV.UK: paying tax, GOV.UK: property allowance.

Mortgage interest and finance costs

If you are an individual landlord paying Income Tax, you cannot deduct mortgage interest as an expense. Companies paying Corporation Tax can. Source: GOV.UK.

Instead, for residential property you get a tax reduction at the basic rate (currently 20%) of the lowest of:

• your finance costs for the year (plus any brought forward)
• your property business profits
• your adjusted total income above your Personal Allowance (excluding savings and dividends)

The reduction cannot create a refund. If it is capped by your profits or income, the difference is carried forward. This is why higher-rate landlords with large mortgages often pay more tax than they expect. Source: GOV.UK: tax relief for residential landlords.

Jointly owned property

Property owned jointly by a married couple or civil partners who live together is usually taxed in equal shares. If you own it in unequal shares and are entitled to the income in the same shares, it can be taxed that way, but you both need to declare it. For other joint owners, your share of the profit is usually based on your share of the property. Source: GOV.UK.

Property income tax rates from April 2027

HMRC's policy paper (published 27 November 2025, after Budget 2025) introduces separate tax rates for property income from 6 April 2027. For the 2027 to 2028 tax year they are:

• property basic rate: 22%
• property higher rate: 42%
• property additional rate: 47%

These apply in England, Wales and Northern Ireland. From April 2027, reliefs and allowances will also be applied to property, savings and dividend income only after other income. Source: HMRC: changes to tax rates for property, savings and dividend income.

Our calculator covers 2026 to 2027 only. We will add 2027 to 2028 once HMRC publishes the full rules, including how the finance cost reduction works with the new rates.

Records and Making Tax Digital

Keep records of rent and expenses, such as rent books, receipts, invoices and bank statements, for at least 5 years after the 31 January deadline for each tax year. Source: GOV.UK.

If your rent before expenses (plus any self-employment turnover) is over £50,000, £30,000 or £20,000 in the qualifying years, you must keep digital records and send quarterly updates through HMRC-recognised software. See Making Tax Digital explained and compare landlord software.

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