Quick Answer

How Much Tax Do I Pay on Rental Income?

Reviewed by Jay Sabine – CeMAP, Cert CII (MP) – 29 years experience
CeMAP Professional - The London Institute of Banking & FinanceCert CII Member - Chartered Insurance Institute

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

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

Why This Matters for Your Mortgage

Understanding these details helps you make informed decisions during the mortgage process. Every element of your application—from deposits to documentation—affects your approval chances and the rates you can access.

Lenders assess applications holistically, weighing multiple factors together. Knowing what they look for allows you to present the strongest possible application. This is particularly important for non-standard situations where lender criteria varies significantly.

Ready to discuss your options?

FCA regulated advice tailored to your situation

Speak to BTL SpecialistCall Us

Related Questions

Buy-to-let mortgages
Limited company buy-to-let
Stamp duty second home
Portfolio landlord mortgages

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

Buy-to-Let
CeMAP Professional - The London Institute of Banking & FinanceCert CII Member - Chartered Insurance Institute
Jay Sabine
CeMAP, Cert CII (MP)
29 Years Experience

Content reviewed: January 2026

CeMAP awarded by The London Institute of Banking & Finance. Cert CII (MP) awarded by the Chartered Insurance Institute.

Income Tax Bands 2024/25

Tax BandIncome RangeRate
Personal AllowanceUp to £12,5700%
Basic Rate£12,571 to £50,27020%
Higher Rate£50,271 to £125,14040%
Additional RateOver £125,14045%

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
TaxpayerRental IncomeExpensesTaxableTax 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

People Also Ask

Verified Client Reviews

Independently authenticated via Reviews.io. Only real clients can leave feedback.

★★★★★

Loading verified client reviews...