How rental income is taxed
Rental profit — your rental income minus allowable expenses — is added to your other taxable income, such as salary, and taxed through the normal Income Tax bands. There's no separate landlord tax rate: your rental profit is simply taxed at whatever rate it falls into once your other income is taken into account, which can mean some of it is taxed at 20%, some at 40%, or a mix of both.
This calculator works out the tax using the marginal-rate method: it calculates your total tax with your rental profit added to your other income, then your tax on your other income alone, and the difference is the tax due specifically on the rental profit.
Mortgage interest: a tax reduction, not a deduction
Since the rules changed (fully in effect from the 2020/21 tax year), individual landlords can no longer deduct mortgage interest and other finance costs from rental income before working out tax. Instead, you get a tax reduction worth 20% of your finance costs, applied after your tax bill is calculated — capped at the lower of your finance costs and your rental profit. This particularly affects higher and additional-rate taxpayers, who no longer get 40% or 45% relief on that interest, only the flat 20%.
The £1,000 Property Allowance
If your total rental income for the tax year is £1,000 or less, it's entirely tax-free and you don't need to declare it. If your income is higher, you can choose to deduct the flat £1,000 allowance instead of your actual expenses, which can work out better if your real costs are low, such as renting out a single furnished room. You can't claim both the allowance and your actual expenses in the same tax year — use the toggle above to compare which gives you a lower tax bill.
Example rental income tax calculations
These worked examples come straight from the calculator above, so the figures match exactly what you'd see entering the same numbers yourself.
Basic-rate landlord
£12,000 rent · £28,000 other income
- Rental profit
- £10,500
- Tax due
- £1,300
Higher-rate landlord
£18,000 rent · £55,000 other income
- Rental profit
- £16,000
- Tax due
- £5,000
Small room, Property Allowance
£4,500 rent · £30,000 other income
- Rental profit
- £3,500
- Tax due
- £700
Mortgage-free, no finance costs
£10,000 rent · £20,000 other income
- Rental profit
- £8,800
- Tax due
- £1,760
Frequently asked questions
How is rental income taxed in the UK?
Rental profit (income minus allowable expenses) is added to your other income, such as salary, and taxed through the normal Income Tax bands, at whatever rate that profit falls into once your other income is accounted for. There's no separate 'landlord tax rate' — it's just Income Tax, calculated on top of everything else you earn.
Can I deduct my mortgage interest from rental income?
No, not since the rules changed (fully in effect from the 2020/21 tax year onwards). Mortgage interest and other finance costs no longer reduce your taxable rental profit directly. Instead, you get a tax reduction worth 20% of your finance costs, applied after your tax bill is calculated. This can leave higher and additional-rate taxpayers worse off than under the old rules, since they no longer get 40% or 45% relief on that interest.
What is the £1,000 Property Allowance?
If your total rental income for the tax year is £1,000 or less, it's entirely tax-free and you don't need to declare it. If your income is over £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses (useful if your real costs are lower than £1,000), or deduct your actual allowable expenses instead — whichever gives you a lower taxable profit. You can't use both in the same tax year.
What counts as an allowable expense?
Costs wholly and exclusively for renting out the property: letting agent and management fees, landlord insurance, repairs and maintenance (not improvements), utility bills you pay, ground rent and service charges, and accountancy fees. It doesn't include mortgage interest (which gets the separate 20% tax reduction instead), or capital costs like a new kitchen or extension, which are instead offset against Capital Gains Tax when you sell.
What if my finance costs are higher than my rental profit?
The 20% tax reduction is capped at the lower of your finance costs and your rental profit for the year, so you can't use it to create an overall loss. Any unused finance costs can normally be carried forward and set against rental profits in future tax years.
Do furnished holiday lets follow the same rules?
Not historically, but the special Furnished Holiday Lettings (FHL) tax regime, which allowed full mortgage interest deduction and other reliefs, was abolished from April 2025. FHL properties are now taxed under the same rules as other rental property, which is what this calculator assumes.
Do I need to complete a Self Assessment tax return for rental income?
Generally yes, if your rental income (before expenses) is over £1,000 in a tax year, you need to register for and complete Self Assessment to declare and pay tax on it. HMRC's income thresholds for reporting can change, so check current GOV.UK guidance for your specific situation.
Methodology and assumptions
This rental income tax calculator assumes:
- You're an individual landlord (not a limited company — company-owned property is taxed differently, under Corporation Tax), owning the property personally or with others.
- Rental profit is taxed using the marginal-rate method on top of the other taxable income you enter, using the same Income Tax bands as the Take-Home Pay Calculator.
- The finance cost tax reduction is capped at the lower of your finance costs and your rental profit. This calculator doesn't apply the rarer third HMRC test (capping the reduction at "adjusted total income" less the Personal Allowance), which mainly affects landlords with very low total income.
- If you use the £1,000 Property Allowance, this calculator still applies the finance cost tax reduction separately, since HMRC treats it as a tax reduction rather than a deductible expense. If in doubt about your own situation, check with an accountant.
- All figures are rounded to the nearest penny.
For Corporation Tax on a company-owned rental property, see the Corporation Tax Calculator.
Sources
Tax figures for 2026/27 are taken directly from:
- Income Tax rates and Personal Allowances (GOV.UK)
- Income Tax in Scotland (GOV.UK)
- Scottish Income Tax: rates and bands 2026 to 2027 (gov.scot)
- Rates and thresholds for employers 2026 to 2027 (GOV.UK)
- National Insurance rates and categories (GOV.UK)
- Salary sacrifice and the effects on PAYE (GOV.UK)
- Tax on your private pension contributions: Annual Allowance (GOV.UK)
- Tapered annual allowance explained 2026/27 (MoneyHelper)
- Money purchase annual allowance (MPAA) (MoneyHelper)
- National Minimum Wage and National Living Wage rates (GOV.UK)
- Maximum weekly working hours (GOV.UK)
- Personal Allowances: adjusted net income (GOV.UK)
- Child Benefit tax charge (GOV.UK)
- Child Benefit rates (GOV.UK)
- Company car benefit: the appropriate percentage, 480 Appendix 2 (GOV.UK)
Further guidance referenced on this page:
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