How rental income is taxed

GOV.UK defines rental income as the rent you get from your tenants, but the figure is often wider than the monthly rent alone. Payments a tenant makes for the use of furniture count, and so do charges for extra services you provide, such as cleaning communal areas, hot water, heating and repairs.

If you own the property with someone else, each owner is taxed on their own share. Property owned jointly by married couples and civil partners who live together is usually taxed in equal shares. Where a couple own the property in unequal shares and are entitled to the income in those same shares, they can be taxed that way instead, but both must declare their beneficial interests to HMRC.

Your taxable profit is the rent less allowable expenses. GOV.UK lists costs such as general maintenance and repairs, letting agent and management fees, landlord insurance, ground rents and service charges, and accountant's fees. Improvements are a different matter: adding an extension, or replacing a kitchen with one of a higher specification, is capital spending and cannot be set against rent.

When you replace a domestic item in a let house or flat, such as a sofa or a fridge, you may be able to claim the cost of the replacement. That relief does not cover the first purchase of an item, and it does not apply when you rent out a room in your own home.

Mortgage interest on a residential let is handled separately. It is not deducted from rent at all, and instead gives a tax reduction at the basic rate, which our guide to mortgage interest tax relief for landlords explains. Landlords with very small rental income can also use the £1,000 property allowance in place of their actual costs.

Landlords who meet the criteria can work out their profit on the cash basis, which GOV.UK describes as a simpler way of working out taxable profits for businesses with straightforward tax affairs. If you qualify but would rather use traditional accounting, you can opt out by ticking a box on your return.

GOV.UK says the rate of tax you pay depends on your total income for the year, so rental profit counts alongside any salary or pension and is taxed at the normal income tax rates. That means the same rental profit can be taxed at 20% for one landlord and 40% for another, depending on what else they earn. Scottish taxpayers pay different rates and bands on property income.

The Budget on 28 October 2026 announced separate property income rates of 24%, 44% and 49% from the 2027 to 2028 tax year for taxpayers outside Scotland. These are announced and not yet law, so the table shows the rates that apply now.

Small amounts of rent may not need reporting at all. If your gross property income is £1,000 or less, the property allowance usually covers it. Between £1,000 and £2,500 you need to contact HMRC, and above £2,500 you must register for self assessment. Anyone who needs to register has to tell HMRC by 5 October following the end of the tax year concerned.

For the 2025 to 2026 tax year, the online return and the tax are due by 31 January 2027. Landlords whose bill is large enough may also have to make payments on account towards the following year, each of which is half of the tax owed for the year before. Our self assessment deadlines guide has the full set of dates.

Making Tax Digital for Income Tax now applies to landlords whose gross income from property and self-employment, before expenses, was over £50,000. From April 2027 the line drops to over £30,000, and from April 2028 to over £20,000. The guide to Making Tax Digital for landlords covers what that means in practice.

In a year when costs are higher than rent, for example because of a long empty period or heavy repairs, the rental business makes a loss. GOV.UK says that normally you can only offset that loss against profits from the same rental business in future years, rather than against a salary or other income. If you let several properties, their results are combined into a single rental business, so a loss on one can reduce the profit on another in the same year. When the rental business ends, any losses still carried forward are usually lost.

Plenty of landlords with one straightforward let complete the property pages of their return themselves. If yours is more involved, our page on accountants for landlords sets out the kind of work an accountant does. Send us a few lines about your lettings and we will read them; where we can, we will put you in touch with a local accountant, though we cannot promise one will be available.