Tax on rental income: how much do you pay?
In the UK you pay income tax on your rental profit, not on the rent itself. Take your allowable expenses off the rent, add what is left to your other income, and the profit is taxed at the rate your total income reaches: 20%, 40% or 45% in England, Wales and Northern Ireland. Mortgage interest is not deducted; you get a tax credit of 20% of the interest instead.
How rental income is taxed: the five steps HMRC uses
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Add up the rent you received
Count all rent received in the tax year, which runs from 6 April to 5 April, before any costs. If you own part of the property, count only your share.
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Take off allowable expenses or the property allowance
Deduct running costs such as letting agent fees, repairs and insurance. If your costs are small you can deduct a flat £1,000 property allowance instead, but you cannot do both.
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Add the profit to your other income
Your property profit is added to your salary, pension and self-employment profit. The first £12,570 of total income is usually tax free, but that allowance shrinks once your income passes £100,000.
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Tax the profit at the rates it reaches
Your other income fills the tax bands first and the rental profit sits on top of it. Profit inside the basic rate band is taxed at 20%, and profit above it at 40% or 45%. Scotland uses its own bands.
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Take off the mortgage interest credit
Mortgage interest is not an expense. Your tax bill is reduced by 20% of the interest instead, limited by your property profit and your income. This is the Section 24 rule.
Worked example: a landlord who pays higher rate tax
A landlord in England earns £45,000 from their job in 2026/27. They receive £18,000 rent, spend £3,200 on letting fees, repairs and insurance, and pay £6,400 of mortgage interest.
- Rent received
- £18,000
- Less allowable expenses
- £3,200
- Property profit
- £14,800
- Tax on the salary alone
- £6,486
- Tax on salary and profit, before the credit
- £11,352
- Less the Section 24 credit
- £1,280
- Total income tax
- £10,072
- Tax caused by the rental income
- £3,586
The salary uses up the personal allowance and part of the basic rate band. Of the profit, £5,270 falls in the basic rate band at 20% and £9,530 in the higher rate band at 40%. The landlord keeps £4,814 of the rent after costs and tax.
Using the property allowance instead of expenses would raise the tax on the rent to £5,746, because the allowance replaces the expenses and also removes the mortgage interest credit.
How much tax do you pay on rental income at each tax rate?
The same property can mean very different tax bills, because rental profit is taxed at the rate your other income has already reached. Each landlord below lives in England and has the property from the worked example: £18,000 rent, £3,200 of running costs and £6,400 of mortgage interest.
| Other income | Top rate reached | Tax on the rent | Share of the rent paid in tax |
|---|---|---|---|
| £20,000 | Basic rate, 20% | £1,680 | 9.3% |
| £45,000 | Higher rate, 40% | £3,586 | 19.9% |
| £100,000 | Higher rate, 40% | £7,600 | 42.2% |
| £130,000 | Additional rate, 45% | £5,380 | 29.9% |
Worked out with the same engine as the calculator, using 2026/27 rates for England, Wales and Northern Ireland.
In this example the landlord earning £100,000 pays more tax on the rent than the one earning £130,000. Above £100,000, each £2 of extra income removes £1 of personal allowance until none is left, so rental profit in that range is taxed at an effective 60%. The £130,000 earner has already lost the whole allowance, so their profit is taxed at the additional rate only.
Income tax rates on rental income for 2026/27
These are the bands for England, Wales and Northern Ireland. Scotland has six bands of its own, set out in the guide to rental income tax in Scotland.
| Band | Rate | Taxable income | Total income, standard personal allowance |
|---|---|---|---|
| Basic rate | 20% | £0 to £37,700 | £12,571 to £50,270 |
| Higher rate | 40% | £37,701 to £125,140 | £50,271 to £125,140 |
| Additional rate | 45% | Over £125,140 | Over £125,140 |
Last verified 13 September 2026 against GOV.UK and HMRC.
Allowances that change the answer
| Allowance | 2025/26 | 2026/27 | 2027/28 |
|---|---|---|---|
| Personal allowance | £12,570 | £12,570 | £12,570 |
| Allowance starts to fall above | £100,000 | £100,000 | £100,000 |
| Property allowance | £1,000 | £1,000 | £1,000 |
| Rent a Room limit | £7,500 | £7,500 | £7,500 |
| Rent a Room limit, shared | £3,750 | £3,750 | £3,750 |
| Mortgage interest credit | 20% | 20% | 22% |
Last verified 13 September 2026 against GOV.UK and HMRC.
From 6 April 2027, property income is taxed at its own rates. The changes are explained in property income tax rates from April 2027.
Paying tax on rental income
You pay tax on rental income through Self Assessment. If you have not sent a tax return before, register by 5 October after the end of the tax year in which you started letting. File your return online by 31 January and pay what you owe by the same date.
If your bill is more than £1,000, HMRC usually asks for payments on account towards the next year as well, due on 31 January and 31 July. If your gross property income is £1,000 or less, the property allowance covers it and you usually do not need to tell HMRC.
Making Tax Digital for Income Tax has applied since 6 April 2026 to landlords and sole traders with qualifying income over £50,000, and it extends to qualifying income over £30,000 from 6 April 2027. The guide to Making Tax Digital for landlords covers the quarterly updates, and the guide for first-time filers covers your first return.
Work out your own figures
Enter your income, rent and costs to see your tax, the Section 24 credit and what you keep.