Rental Income Tax Calculator

Rental profit is added to your other income. Mortgage interest is not deductible; instead you get a 20% tax credit.

Updated 2026-10-03 · 2026/27 HMRC rates

Tax on rental income£2,746Profit £12,500 · after-tax rental income £3,754

Tax on rental profit	£3,946
20% mortgage interest tax credit	£1,200
Tax due	£2,746

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Key facts

The personal allowance stays at £12,570 in 2026/27 and is reduced by £1 for every £2 of adjusted net income over £100,000, so it is gone entirely at £125,140 (HMRC income tax rates and allowances).
In England, Wales and Northern Ireland, 2026/27 income tax is 20% on the first £37,700 of taxable income, 40% up to £125,140 and 45% above that (HMRC rates and thresholds for employers 2026 to 2027).
Scotland has six bands in 2026/27: 19% starter on the first £3,967 of taxable income, 20% basic to £16,956, 21% intermediate to £31,092, 42% higher to £62,430, 45% advanced to £125,140 and 48% top above that (HMRC rates and thresholds for employers 2026 to 2027).
Budget 2025 extended the freeze on income tax thresholds and the equivalent employee and self-employed National Insurance thresholds for a further three years, from April 2028 to April 2031 (HM Treasury Budget 2025).
Employees pay Class 1 National Insurance at 8% on earnings between £12,570 and £50,270 a year and 2% above that in 2026/27 (HMRC rates and thresholds for employers 2026 to 2027).
Employers pay 15% National Insurance on earnings above the £5,000 secondary threshold, and eligible employers can claim an Employment Allowance of £10,500 (HMRC rates and thresholds for employers 2026 to 2027).
Self-employed people pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above that; voluntary Class 2 costs £3.65 a week if profits are below £7,105 (GOV.UK self-employed National Insurance rates).
Dividend tax rose by 2 percentage points from April 2026: the basic rate is now 10.75% and the higher rate 35.75%, while the additional rate stays at 39.35% and the dividend allowance stays at £500 (GOV.UK tax on dividends).

Savings and rental income tax

How rental profit is taxed

Individual landlords pay income tax on rental profit: rent received minus allowable expenses. All your UK lettings are pooled into a single property business. The profit is added to your other income and taxed at your normal rates, and there is no National Insurance on ordinary rental income.

Mortgage interest is not deducted from profit. Instead you get a tax credit worth 20% of the lowest of your finance costs, your property profit and your income above the Personal Allowance. Interest that cannot be relieved this year is carried forward.

Basic vs higher-rate landlord: the same property

Take a flat earning £15,000 rent with £3,000 of expenses and £6,000 mortgage interest, so the taxable profit is £12,000.

With £30,000 other income, tax on the profit is £2,400. After the £1,200 interest credit, £1,200 is due and the landlord keeps £4,800 after interest and tax.

With £60,000 other income, the same profit is taxed at 40%: £4,800, less the same £1,200 credit, so £3,600 is due, leaving £2,400. Because relief is capped at 20%, higher-rate landlords with large mortgages can pay tax even when the property barely covers its costs.

Allowable expenses

If your expenses are low, you can deduct the £1,000 property allowance instead of actual costs. Property income of £1,000 or less does not need to be declared at all.

Letting agent and management fees, accountancy fees and legal fees for lets of a year or less.
Buildings and contents insurance, ground rent and service charges.
Repairs and maintenance that restore the property – but not improvements, which are capital costs.
Utility bills and council tax you pay for the tenant, cleaning and gardening.
Replacing furnishings such as beds, sofas, carpets, fridges and crockery, under replacement of domestic items relief. The original purchase is not deductible.

Reporting and other schemes

You must file Self Assessment if rental income is over £10,000 before expenses or £2,500 after expenses. Between £1,000 and £2,500 you can contact HMRC instead. If you do not usually file, register by 5 October after the tax year. Landlords with qualifying income over £50,000 have been in Making Tax Digital since April 2026, with the threshold falling to £30,000 in April 2027.

Letting a furnished room in your own home falls under the Rent a Room Scheme, which makes the first £7,500 a year tax-free (£3,750 if you share the income). Landlords who live abroad for six months or more a year are non-resident landlords: tenants or agents deduct basic rate tax from the rent unless HMRC approves gross payment.

Budget 2025 announced separate property income rates of 22%, 42% and 47% from April 2027, so the figures above will change from 2027/28.

Same rental profit, different total income

Using the same flat (£12,000 profit, £6,000 interest), the table shows how the result changes as your other income rises.

Other income	Tax on profit	Interest credit	Tax due	Kept after interest and tax
£20,000	£2,400	£1,200	£1,200	£4,800
£40,000	£2,746	£1,200	£1,546	£4,454
£60,000	£4,800	£1,200	£3,600	£2,400
£90,000	£5,200	£1,200	£4,000	£2,000

Losses

If your expenses exceed your rent, the loss is set against profits from your other properties in the same year, then carried forward against future property profits. Rental losses cannot normally be set against your salary.

Frequently asked questions

Is property income tax going up?

Budget 2025 announced separate property income rates of 22%, 42% and 47% from April 2027.

Can I deduct mortgage capital repayments?

No. Only the interest qualifies, and only through the 20% tax credit. Capital repayments are not an expense.

Do limited company landlords get full mortgage interest relief?

Yes. Companies paying corporation tax deduct loan interest as an expense. The 20% restriction only applies to individuals paying income tax.

Are furnished holiday lets still taxed differently?

No. The special furnished holiday lettings rules ended in April 2025, so holiday lets are now taxed like other residential lets.

Can I claim the cost of furnishing a new rental?

Not as an expense. The first purchase of furniture is capital spending. Replacing those items later can be claimed under replacement of domestic items relief.

Sources

Figures are taken from official government publications and were last reviewed on 2026-10-03.