How is rental income taxed in the UK?

Rental income is taxed at your marginal rate: 20% (basic), 40% (higher), or 45% (additional rate). Deduct allowable expenses like repairs, insurance, and letting fees. Mortgage interest gets a 20% tax credit (not deductible). Report via Self Assessment. The first £1,000 is tax-free (property allowance).

Learn more about buy-to-let mortgages in our detailed guide.

How is rental income taxed in the UK?

Rental income is added to your other income and taxed at your marginal rate (20%, 40%, or 45%). You can deduct allowable expenses like repairs, insurance, and letting fees. Mortgage interest gets a 20% tax credit. You must report rental income via Self Assessment.

What expenses can I claim against rental income?

Allowable expenses include: letting agent fees, repairs (not improvements), insurance, legal fees for leases, accountant fees, ground rent, service charges, and travel to the property. Mortgage interest is now a 20% tax credit, not a deductible expense.

Do I need to do a tax return for rental income?

Yes, if your rental income exceeds £1,000 per year (after the property allowance). You must register for Self Assessment and file a return by 31 January following the tax year. You'll complete the property pages (SA105) of the return.

How does mortgage interest tax relief work?

Since 2020, mortgage interest is not deductible from rental income. Instead, you get a 20% tax credit on interest paid. For higher rate taxpayers, this means paying more tax than before the rule change. Consider incorporation for large portfolios.

When do I pay tax on rental income?

Tax is paid through Self Assessment: 31 January after the tax year, with payments on account in January and July. For example, 2023/24 tax year: pay by 31 January 2025. If your bill is over £1,000, you'll make advance payments.

Quick Answer

How Much Tax Do I Pay on Rental Income?

Last reviewed: December 2025

Reviewed by Jay Sabine – CeMAP Qualified – 29 years experience

Rental profit is taxed at 20% (basic rate), 40% (higher rate), or 45% (additional rate). Deduct expenses like repairs and insurance. Mortgage interest gets a 20% tax credit. Must file Self Assessment if rental income exceeds £1,000.

As a landlord, your rental profit (income minus allowable expenses) is added to your other income for tax purposes. The tax you pay depends on which band your total income falls into. Since 2020, mortgage interest is no longer deductible but instead qualifies for a 20% tax credit.

Key Points

1Taxed at your marginal rate
2£1,000 property allowance
3Mortgage interest = 20% credit
4Repairs deductible, improvements not
5File Self Assessment by 31 Jan
6Payments on account may apply

Eligibility Criteria

Must register for Self Assessment
Keep records for at least 5 years
Report income over £1,000/year
File return by 31 January

Typical Timeframe

Tax year runs April to April. Self Assessment deadline is 31 January following the tax year. Register by 5 October after your first tax year of rental income.

Next Steps

1Calculate your rental profit
2Identify all allowable expenses
3Keep receipts and records
4Register for Self Assessment
5Consider using an accountant

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For more detailed information about this topic, visit our comprehensive guide:

Buy-to-Let

Jay Sabine

CeMAP Qualified

29 Years Experience

Content reviewed: 13 January 2026

Income Tax Bands 2024/25

Tax Band	Income Range	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

Allowable Expenses

Letting agent fees and management costs

Legal fees for tenancy agreements (not purchase)

Accountant fees for rental accounts

Insurance (buildings, contents, landlord)

Repairs and maintenance (not improvements)

Ground rent and service charges

Council tax (if you pay it)

Utility bills (if you pay them)

Travel costs for property management

Advertising for tenants

Example Tax Calculations

Taxpayer	Rental Income	Expenses	Taxable	Tax Due
Basic rate taxpayer	£12,000/year	£2,000	£10,000	£2,000
Higher rate taxpayer	£18,000/year	£3,000	£15,000	£6,000

*Before mortgage interest tax credit deduction

Mortgage Interest: The 20% Tax Credit

Since April 2020, mortgage interest is not deductible from rental income. Instead:

Calculate tax on full rental profit (before interest)
Then reduce tax bill by 20% of mortgage interest paid
Higher rate taxpayers pay more tax than under old rules
Consider limited company structure for new purchases

How Much Tax Do I Pay on Rental Income?

Key Points

Eligibility Criteria

Typical Timeframe

Next Steps

Related Questions

Income Tax Bands 2024/25

Allowable Expenses

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Key Points

Eligibility Criteria

Typical Timeframe

Next Steps

Related Questions

Income Tax Bands 2024/25

Allowable Expenses

People Also Ask

How is rental income taxed in the UK?