UK landlords pay Income Tax on their rental profits, which is the difference between rental income and allowable expenses. Understanding exactly which expenses are tax-deductible, what rental property tax relief is available, and how to structure your affairs efficiently can make a significant difference to your annual tax bill.
This guide covers everything landlords need to know in 2026. Landlord tax deductions, allowable expenses, buy-to-let mortgage interest relief, Capital Gains Tax on property, Stamp Duty, Making Tax Digital obligations, and the upcoming property income tax rate changes from April 2027.
For personal tax support as a landlord, see our landlords and property investors page or our Capital Gains Tax advisory service.
What is income from a rental property?
Rental income is classified as any money you receive from renting a property. These include:
- Rent, such as renting out a flat, house, or part of it, or renting out a parking space
- Insurance payments received from tenants
- Any other payments received from letting of a property
- If you take non-refundable deposits or keep some money from a returnable deposit, these count as part of your rental income.
Landlord tax deductions and allowable expenses for rental properties
When renting out property, certain allowable expenses can be deducted from rental income.
Are service charges and ground rent tax deductible?
Any council tax or business rates you pay on the property can be classed as an allowable expense.
If you pay rent or ground rent for the property, then this is an allowable deduction from rental income.
Is landlord insurance tax-deductible?
Property insurance is an allowable expense. Warranties and breakdown cover for items like boilers can also qualify as an allowable cost. Life insurance premiums for mortgages are not allowable deductions.
Utilities – gas, electricity, water, sewerage
It is usual for the tenant to pay for utilities, but if you do pay these bills for the property, e.g., between rentals, then you can claim them as a deduction for tax purposes.
Gardening & cleaning
Property upkeep costs that you pay for are also tax-deductible. This may be regular gardening or one-off cleaning between tenants.
Other services
If you provide any other services to your tenants or the property, the costs of these are also tax-allowable, e.g., telephone, satellite TV, etc.
Landlord service charges
Service charges that you, as a landlord, are charged are also tax-deductible from the income for that property, for example:
Are letting agent fees and commissions tax-deductible?
Agents’ fees for finding tenants, taking inventory, etc.
Property management fees.
Charges by a flat management company or residents’ association.
Travel
You may be able to claim some expenses for necessary visits to your property, so keep accurate records.
Property repairs & renovations
Refurbishment works such as the ones below are an allowable expense incurred and therefore are tax-deductible:
- Repairs – repairing something that already exists to bring it back up to the original purchased quality, e.g., painting & decorating, a replacement bathroom or fitted kitchen, a new roof, and replacing old windows with double-glazed ones.
- Renewals – replacing something entirely that the property already had, e.g. dishwasher, freestanding cooker, curtains. (Note: Different rules apply for businesses, and there is no tax relief for the first-time purchase of furniture or equipment.)
- Improvements – adding to your original purchase, e.g., a new conservatory, a loft extension, a bathroom, or a new kitchen. This can include initial renovation costs if your purchase was not habitable. These costs count as improvements to your original purchase, so are tax-deductible against the investment gain on sale of the property and not against income.
Tools & equipment
Capital allowances may be available for plant and machinery in a commercial property, or for ladders and tools you use that are not part of the property being rented out, e.g., a Scaffold tower. However, Capital allowances are not available for equipment in residential property unless it’s a Furnished Holiday Let (FHL).
Are professional fees and agent commissions tax-deductible for landlords?
Professional fees for the property may be tax-deductible, but must be attributed to either income or sale/purchase to be deducted from the capital gain on sale.
- Income deductions are for things like maintenance issues, certifications, financial advice, leases, disputes or debt collection.
- Capital Gains deductions apply to buying, selling, or establishing title.
Advertising and marketing
Advertising and marketing for renting your property is tax-deductible from income. However, advertising for sale costs are deductible from the capital gain on sale.
Other direct costs
Any other costs you can directly attribute to the property may also be tax-deductible, e.g., stationery, phone calls and association membership.
Expenses you cannot claim
Capital expenditure, such as buying a property, adding an extension or paying for furnishings, cannot be classed as an allowable expense.
Personal expenses that don’t relate to your rental property can’t be claimed against your rental profit – this includes your private mobile phone bill.
Clothing isn’t an allowable expense. Even if you bought overalls to do work relating to your rental property, you can’t claim them on your tax return.
Expenses if I am paying a mortgage on a rental property
- No payments of the mortgage (either capital or interest) are deductible from taxable income.
- Finance charges and loan interest are not deductible, but limited relief is available for loan interest and other finance costs.
- You may claim the tax reduction of 20% of finance costs and mortgage interest if you remortgage, as long as the aggregate value of the mortgage(s) does not exceed the value of your property when you first let it. Contact us for more advice.
Can you claim interest on a rental property?
To explain the Buy-to-let mortgage relief, you need to understand the types of loans and associated costs. Tax reliefs are available for all costs of obtaining loans to purchase property or release equity, including interest, arrangement fees, bank charges, but not capital repayments. The purpose of the loan is key, and it should be transparent to track.
These costs are mostly deductible from income before tax, however the rules for loan interest have changed recently for income tax on residential property income.
Only 20% of the interest may be deducted as a credit on the income tax bill, rather than as an income deduction. However, this can have a knock-on effect on other taxes, e.g. student loan and child benefit repayments.
Allowances and tax reliefs for UK rental income?
In the UK, there are tax reliefs and allowances available for rental income from property.
Rent a Room Relief:
The Rent a Room Scheme allows you to make up to £7,500 a year tax-free by renting out a furnished room in your home. If you share this income with someone, the limit is halved to £3,750 per person.
If you earn less than £7,500, you’re automatically exempt from tax, and you do not have to declare anything. If you earn more, you need to complete a UK property tax return.
You can then choose to join the scheme and get your tax-free allowance by doing it on your tax return.
Eligibility for the Rent a Room Relief Scheme.
- You’re a landlord living in the same place, whether you own it or not
- You’re in charge of a bed and breakfast or a guest house
You cannot use the rent-a-room relief scheme for homes that have been converted into separate flats.
Furnished Holiday Lettings Changes
From 6 April 2025, the government has ended the Furnished Holiday Lettings regime.
Landlords will no longer be able to claim Capital Allowances for furniture, fixtures and equipment. However, any existing capital allowances on assets purchased prior to 6 April 2025 can still be carried forward.
Capital gains tax reliefs such as Rollover Relief, Business Asset Disposal Relief and Gift Holdover Relief will no longer be available for Furnished Holiday Lettings.
Mortgage interest relief will be restricted to the basic rate of 20% for Furnished Holiday Lettings, bringing them in line with the standard rental property rules. Landlords operating through limited companies will still be able to offset the full mortgage interest against corporation tax.
Property income allowance
If you earn less than £1,000 a year from letting out a rental property, you don’t need to inform HMRC. This is a £1,000 tax-free property allowance. You should contact HMRC if your rental property income is over £1,000.
What is Buy-to-let tax relief, and how does it work
Buy-to-let tax relief in the UK refers to the deductions landlords can claim on their mortgage interest payments to reduce their taxable rental income.
Every buy-to-let landlord gets a tax credit equal to 20% of the mortgage interest.
If you made £20,000 from renting and are in the 20% tax group, your tax bill is £4,000.
If, say, your annual mortgage interest is £5,000, you can get a tax break of £1,000 (which is 20% of £5,000).
To calculate the final tax bill, subtract the Buy-to-let tax relief from your tax bill:
£4,000 – £1,000 = £3,000 is what you owe to HMRC.
Non-Resident Landlord Scheme
The Non-Resident Landlord Scheme (NRLS) is a tax scheme that applies to landlords with a usual place of abode outside the UK – known as non-resident landlords.
Anyone who lives abroad but receives income from letting out a property in the UK is typically taxable in the UK.
Understanding who is a non-resident landlord is not as straightforward as being a general non-UK resident, as determined by the Statutory Resident Test.
The requirements for being considered a non-resident landlord are loosely defined as someone who rents out a UK property and is not considered to regularly live in the UK. While there are no specific laws to determine this, if a person rents a UK property and spends more than six continuous months outside the UK, they would likely be considered a non-resident landlord.
It is therefore possible to be both a UK tax resident according to the Statutory Residence Test and also a non-resident landlord.
So, if you spend a significant period of any tax year outside the UK and rent a UK property, it’s vital that you understand your UK tax obligations and the Non-Resident Landlord Scheme.
How much tax do I pay on rental income? A worked example
The amount of tax you pay on rental income depends on your total income from all sources. Here is a straightforward example:
Ben owns a buy-to-let flat which he rents out for £1,400 per month (£16,800 per year). He also works part-time and earns £22,000 from employment. His allowable property expenses total £4,600 per year, and his annual mortgage interest is £5,300.
| Amount | |
| Gross rental income | £16,800 |
| Less: allowable expenses | (£4,600) |
| Rental profit | £12,200 |
| Total income (employment + rental) | £34,200 |
| Less: personal allowance | (£12,570) |
| Taxable income | £21,630 |
| Income tax at 20% | £4,326 |
| Less: mortgage interest tax credit (20% of £5,300) | (£1,060) |
| Final tax bill | £3,266 |
Note how the mortgage interest does not reduce the rental profit. Instead, it generates a 20% tax credit off the final bill. This is the section 24 mortgage interest restriction in practice, and it hits higher-rate taxpayers harder because they receive 20% relief regardless of their tax rate.
Need help reporting your Rental income?
Get in touch with us so we can help you stay tax compliant with HMRC
Withholding income and paying tax quarterly
The Non-Resident Landlord Scheme issues a legal obligation for either the tenant or the letting agent to deduct and withhold tax from any payments due to the landlord. This tax must then be paid to HMRC every quarter.
When reporting income via a Self-Assessment Tax return, any tax already paid to HMRC under the NRLS will also be deducted from any tax due.
Exemptions from withholding tax at source
HMRC may determine that if income from rental property is low enough, there are no reporting requirements. HMRC will confirm in writing whether you are exempt from quarterly reporting and payments, so you should assume that either your tenant or your letting agent is required to report and pay tax quarterly unless you have been previously advised.
The NRLS imposes duties on the rental agent (if any) or the tenant. The letting agent is required to withhold income tax before paying it to the foreign landlord.
If there is no UK rental agent, the renter must withhold tax personally if the rent paid to the overseas landlord exceeds £100 per week.
Any tax withheld by the letting agent or tenant is subsequently deducted from the foreign landlord’s UK tax liability when they file a UK self-assessment tax return.
Property losses
Property losses may be offset against any other property profits of the same rental business in the year and then carried forward against the future profits of that same business.
There are special rules where a loss is created by capital allowances or the business is in agriculture. This are called Sideways relief.
Where the loss is due to capital allowances or to certain agricultural expenses, sideways loss relief can be claimed against total income. The relief operates slightly differently from the relief for trading losses, because it is given against the net income of the tax year of the loss and/or the following tax year. The loss cannot be carried back.
The relief is not automatic and needs to be claimed. The time limit for claiming the relief is 12 months from 31 January that falls after the end of the tax year against which the loss is to be set.
Capital gains tax on property in the UK
When you sell a rental property, any profit you make is subject to Capital Gains Tax (CGT). The rates for residential property in 2026/27 are:
- 18% for basic-rate taxpayers
- 24% for higher and additional-rate taxpayers
The annual CGT exempt amount is £3,000 for 2026/27.
How is the gain calculated?
Your gain is the sale price less:
- The original purchase price
- Buying and selling costs (solicitor fees, estate agent fees, SDLT)
- Improvement costs (not repairs, only genuine improvements that add value)
The 60-day CGT reporting rule
This is one of the most important and most missed rules for landlords. When you sell a UK residential property and make a taxable gain, you must:
- Report the gain to HMRC within 60 days of completion
- Pay the estimated CGT within the same 60-day window
You cannot wait until your annual Self Assessment return. Missing the 60-day deadline results in an automatic £100 penalty, with further daily penalties and interest accruing. Report online through HMRC’s Capital Gains Tax on UK Property service.
Private Residence Relief
If the property was at any point your main home, you may be eligible for Private Residence Relief (PRR), which exempts the period you lived in it from CGT. The final 9 months of ownership are always treated as if you lived there, even if you had already moved out.
Lettings Relief
Lettings Relief is now only available where the owner was living in the property at the same time as the tenant (i.e. shared occupancy). It is no longer available to most buy-to-let landlords.
Stamp Duty Land Tax for landlords
When buying a property in England or Northern Ireland, you pay Stamp Duty Land Tax (SDLT). Landlords and second-home buyers pay an additional surcharge on top of the standard SDLT rates.
From 31 October 2024, the additional property surcharge increased from 3% to 5%. This applies to every SDLT band on the purchase:
| Purchase price | Standard SDLT rate | Additional property rate |
| Up to £125,000 | 0% | 5% |
| £125,001 – £250,000 | 2% | 7% |
| £250,001 – £925,000 | 5% | 10% |
| £925,001 – £1.5m | 10% | 15% |
| Over £1.5m | 12% | 17% |
Note: First-time buyers purchasing their only property are exempt from the surcharge. The surcharge applies if you already own a residential property anywhere in the world at the time of purchase.
Properties purchased through a limited company are always subject to the additional surcharge, even if it is the company’s first purchase.
Should I buy property through a limited company?
One of the most searched questions among UK landlords right now is whether to hold property personally or through a limited company (often called an SPV – Special Purpose Vehicle). There is no universal answer, but here are the key differences:
Advantages of a limited company for property:
- Mortgage interest is fully deductible against rental income (Section 24 does not apply to companies)
- Corporation Tax (19% on profits of up to £50,000, rising to 25% on profits above £250,000) can be lower than higher-rate Income Tax
- Profits can be retained in the company and extracted tax-efficiently via dividends
- Better for building a larger portfolio and passing it to family members
Disadvantages of a limited company for property:
- Higher mortgage rates, buy-to-let mortgages for limited companies typically carry higher interest rates and fees
- The 5% SDLT additional surcharge applies even to a company’s first purchase
- If you transfer an existing personally-owned property to a company, this is treated as a disposal triggering CGT and SDLT
- More administrative cost – annual accounts, Corporation Tax returns, Companies House filings
Who it tends to suit: Higher-rate taxpayers building a portfolio from scratch, or those reinvesting profits rather than drawing income immediately. It is rarely worth the cost of transferring existing properties.
Speak to a property tax specialist before making this decision. The right answer depends entirely on your individual circumstances, income level, and long-term plans.
Making Tax Digital for landlords
From 6 April 2026, landlords with property income (or combined property and self-employment income) above £50,000 must use Making Tax Digital for Income Tax. This requires:
- Keeping digital records using HMRC-compatible software
- Submitting quarterly updates to HMRC (in addition to the annual Self Assessment return)
- The threshold drops to £30,000 from April 2027 and £20,000 from April 2028
If you are above the threshold and have not yet signed up, you are already non-compliant. See our Making Tax Digital for Income Tax guide for full details.
Landlord Self Assessment registration and filing deadlines
As a landlord with rental income above £1,000, you must register for and file a Self Assessment tax return each year. Key deadlines:
| Deadline dates | What it covers |
| 5 October | Register for Self Assessment by this date in the year after you first received rental income |
| 31 January | File your online return and pay all tax owed |
| 31 July | Pay your second payment on account, where applicable |
| 60 days from completion | Report and pay CGT on any residential property disposal |
Your rental income is declared on the SA105 UK Property supplementary pages of your Self Assessment return. See our guide to registering for Self Assessment for the full registration process.
Landlord tax rate changes from April 2027
From 6 April 2027, rental income will be taxed at separate, higher rates than other income. This is the most significant landlord tax change announced in recent years:
| Tax band | Current rate | New rate from April 2027 |
| Basic rate | 20% | 22% |
| Higher rate | 40% | 42% |
| Additional rate | 45% | 47% |
This affects all landlords with property income and will significantly increase annual tax bills. Planning ahead, including reviewing whether a limited company structure makes sense before April 2027, is strongly advisable. Contact our team for a personalised review before the changes take effect.
FAQs
Do I need to declare rental income if I only earn a small amount?
If your total gross rental income is £1,000 or less in a tax year, you do not need to declare it. This is covered by the £1,000 property income allowance. If you have a rental income above £1,000, you will need to declare this through Self Assesment.
Can I claim expenses if I live in the property too?
If you rent out part of your home while living in it, you should use the Rent a Room Scheme (up to £7,500 tax-free) rather than claiming expenses. You cannot use both the Rent a Room scheme and claim expenses on the same property simultaneously.
What happens if I make a loss on my rental property?
Rental losses can be carried forward and offset against future rental profits from the same property business. They cannot usually be offset against other income (such as employment income), except for losses arising from capital allowances or qualifying agricultural expenses, where sideways relief may apply.
Do I pay tax on rental income from a jointly owned property?
Yes. If you own a property jointly with someone else, you are each taxed on your share of the rental profit. Married couples and civil partners are normally taxed 50/50 by default, but can elect for a different split that reflects their actual ownership.
What is the Let Property Campaign?
The Let Property Campaign is HMRC's voluntary disclosure facility for landlords who have not declared rental income in previous years. Coming forward voluntarily results in significantly lower penalties, typically between 10% and 20% of unpaid tax, compared to penalties of up to 100% if HMRC discovers the undisclosed income first.
What expenses can I claim when I first buy a rental property?
The initial purchase costs, Stamp Duty, legal fees, and mortgage arrangement fees cannot be deducted from rental income. However, they are added to your base cost for CGT purposes, reducing your taxable gain when you sell. Initial renovation costs to bring a property to a lettable standard are also treated as capital expenditure. Once the property is let, ongoing repairs and maintenance become deductible from rental income as normal allowable expenses.
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