Rental Income Tax Calculator

Enter annual figures for one tax year. The tool shows taxable rental profit and an estimated income tax result after the Section 24 mortgage interest tax credit. Use the joint ownership field if this is your share of a jointly owned property. If your case is more complex, treat this as a planning estimate and confirm with HMRC guidance or an accountant.

How Rental Income Is Taxed in the UK

Rental profit is taxed as part of income tax. In practical terms, that means you calculate property profit first, then add it to salary, pension, self-employment or other taxable income to determine your marginal band. If your overall taxable income sits in basic rate territory, the marginal rate applied to your rental profit is often 20%. If your income reaches higher-rate territory, the portion in that band is taxed at 40%. Additional-rate taxpayers can face 45% on relevant income.

Rates and thresholds can differ by jurisdiction and policy changes, especially if your wider income profile is complex. The calculator asks you to select the rate you want to model, so you can test scenarios quickly. A common approach is to run two or three rate assumptions before budgeting for payment on account and final balancing payment.

Tax is normally assessed by tax year (6 April to 5 April). Good landlord bookkeeping means tracking rent received, separating allowable expenses from capital costs, and maintaining mortgage statements that show interest paid in the year. Clean records are the fastest way to avoid errors and penalty risk.

Allowable Expenses Landlords Commonly Claim

Allowable expenses are everyday running costs incurred wholly and exclusively for letting activity. These reduce taxable rental profit when you claim actual expenses. The following categories are common in landlord tax calculations and are included in the framework of this page:

• Letting agent fees: management fees, tenant-find fees and administration charges linked to ongoing letting operations.
• Repairs and maintenance: restoring property condition such as fixing boilers, patching leaks, repainting after wear, replacing broken fixtures with like-for-like items.
• Landlord insurance: buildings insurance, contents cover for furnished lets, specialist landlord policies and liability cover.
• Professional fees: accountancy fees, legal fees for tenancy matters, inventory services and other compliance-related professional costs.
• Advertising and marketing: listing fees, photography, portal charges or local marketing directly for finding tenants.

Many landlords also incur utilities, council tax, service charges or ground rent in specific tenancy structures. Whether each cost is claimable depends on circumstances and whether it is revenue in nature or capital in nature. Capital improvements are generally treated differently from repairs. For example, replacing a worn kitchen unit with a similar standard can be a repair in context, while a substantial upgrade that improves the property beyond prior condition may be capital and not deducted in the same way.

The distinction between repairs and improvements is one of the most common sources of filing errors. Keep invoices, job descriptions and before/after notes so you can defend the treatment if HMRC asks for evidence. A spreadsheet with categories matching your tax return sections can save significant time.

Section 24: Mortgage Interest Is a 20% Tax Credit

Under Section 24 rules for individual landlords, mortgage interest is no longer deducted from rental income to calculate taxable profit. Instead, mortgage interest generally gives a tax credit at the basic rate of 20%. This matters because taxable profit can appear higher than expected, even when cash flow is tight.

The simplified flow is:

• Start with rental income.
• Deduct allowable non-finance expenses (or property allowance if chosen).
• Tax the resulting rental profit at your marginal income tax rate.
• Then deduct a tax credit equal to 20% of qualifying finance costs, subject to limits.

For higher-rate and additional-rate landlords, this can create a larger tax bill than under old full interest deduction treatment, because the profit is taxed at 40% or 45% while the finance cost relief arrives only at 20%. The effect is especially visible when interest rates are high and leverage is significant.

The calculator on this page applies this structure directly: mortgage interest is used for a 20% credit, not as a direct deduction from rent. If your credit exceeds tax attributable to rental profit, relief may be restricted and carried forward under specific conditions. For planning, the calculator caps tax at zero and highlights where credit would exceed the immediate tax figure.

Accurate mortgage documentation is essential. Statements should clearly separate interest from capital repayment because only qualifying finance cost is relevant for Section 24 calculations in this context.

Property Allowance £1,000

The property allowance gives up to £1,000 of tax-free property income in certain circumstances. For many landlords, the key point is method choice: you usually claim either the allowance or actual expenses for the same income source, not both together as a double benefit. If your expenses are very low, the allowance can simplify administration. If expenses are higher than £1,000, actual expenses are often better.

Where gross property income is modest, the allowance can reduce or remove taxable profit. Where rents are larger and real costs are substantial, landlords commonly use detailed expense claims instead. The calculator includes a toggle to compare this choice quickly. Turn the allowance on, then off, and watch the taxable profit and final tax figure change.

As with all reliefs, eligibility details matter. Mixed-use arrangements, partnership structures or specific circumstances can require deeper review. Keep records even when using the allowance, because you may need evidence to support the approach used in your return.

Wear and Tear Allowance and Domestic Items

Many landlords still refer to “wear and tear allowance” because it was a widely used term in earlier years for furnished property relief. In modern practice, landlords more often rely on replacement of domestic items rules rather than an automatic broad percentage allowance in the old style. That means claims tend to focus on actual replacement costs of qualifying items instead of a blanket deduction.

In day-to-day landlord language, however, the phrase remains common, especially when discussing furniture and appliances in furnished lets. Examples include replacing a worn sofa, damaged bed, broken white goods or curtains that have reached end of life. Keep purchase invoices, disposal evidence where relevant, and tenancy inventory records to support claims.

If you are reviewing historical records or legacy documentation, be careful not to apply old assumptions automatically to current-year calculations. The safest route is to classify each cost clearly and ensure it aligns with current treatment for your tax year. Where uncertainty exists, a short discussion with a tax adviser can prevent expensive amendments later.

Rent-a-Room Relief £7,500

The Rent-a-Room scheme can exempt up to £7,500 per year of gross receipts when you let furnished accommodation in your main home and meet scheme conditions. This relief is separate from ordinary buy-to-let treatment and is often relevant to live-in landlords, lodger arrangements and homeowners renting spare rooms.

Where income is below or equal to the threshold and conditions are met, tax may be fully relieved. Above the threshold, you may choose between the scheme method and normal property income method depending on which is more beneficial. Joint claims can reduce the individual exemption where ownership is shared, so review details carefully before filing.

The calculator includes a Rent-a-Room option for quick scenario planning. It applies an initial £7,500 reduction before other steps, then calculates profit and tax on the remaining figure. Use it as a directional estimate and confirm eligibility conditions for your exact setup, especially if the property is not your main residence.

Joint Ownership and Profit Splits

Joint ownership is common among spouses, civil partners and family investors. Tax is generally assessed on each owner’s share of property income, so your rental tax bill depends on the share allocated to you. In straightforward cases this may follow legal ownership. In other cases beneficial ownership and declarations may change allocation. Documentation is essential.

The calculator lets you set an ownership percentage so you can estimate your personal share of taxable profit, Section 24 credit and tax due. This is useful when one owner is basic rate and the other is higher rate, because the same gross property outcome can produce very different final tax results between owners.

For planning, run separate calculations for each owner using the same property-level inputs but different ownership percentages and marginal tax rates. Combine the two results to estimate household-level tax. This also helps when forecasting payment on account and cash reserves.

If ownership proportions changed during the year, keep dated records and apply an apportioned approach. If you are unsure whether legal title and beneficial entitlement match your filing position, seek formal advice before submission. Joint ownership disputes and inconsistent returns are common triggers for questions.

Furnished Holiday Lets: Different Rules

Furnished holiday lets (FHL) have historically followed a different ruleset from standard long-term residential letting. Policy changes and transitional arrangements can affect treatment year to year, so landlords with short-stay holiday accommodation should not assume ordinary buy-to-let calculations apply automatically.

Areas that may differ include qualifying conditions, relief interaction, treatment of finance costs, and disposal-related outcomes. Because of this, many FHL owners run a separate accounting schedule from residential lettings to avoid blending categories. If a property switches between holiday and long-term use, records should clearly show dates and income streams.

This page focuses on standard residential landlord income tax logic for 2026 and highlights that FHL may require a separate approach. If you operate an FHL business, treat this calculator as a broad guide only and check current HMRC guidance for the tax year you are filing.

Self-Assessment Filing and Deadlines

Most individual landlords report rental profit through self-assessment. After each tax year ends on 5 April, you prepare your property income figures and submit your return. The key deadline for online filing is 31 January following the end of the tax year. This same date is also typically when balancing tax is due, alongside the first payment on account where applicable.

Paper returns generally have an earlier deadline. Late filing or late payment can trigger penalties and interest, so planning ahead matters. A common routine is to finalise bookkeeping in spring, review figures in summer, and submit before year-end pressure builds. Doing this also gives time to budget for tax.

Landlord filing checklist

• Collect rent statements and bank records for the full tax year.
• Categorise allowable expenses and separate non-deductible or capital costs.
• Identify mortgage interest paid and retain lender evidence.
• Apply property allowance or actual expense method consistently.
• Review joint ownership percentages and ensure returns align between owners.
• Check if Rent-a-Room applies and whether scheme or normal method is better.
• Submit return and make payment by 31 January to avoid penalties.

The earlier you prepare, the easier it is to spot missing invoices or classification issues. Landlords who keep digital records monthly generally complete returns much faster and with fewer surprises. If you expect a high tax bill, setting aside a fixed percentage of net rent each month can help avoid cash flow stress in January.

National Insurance on Rental Income

For most individual landlords, ordinary rental income is not subject to National Insurance contributions. In practical terms, your landlord tax bill usually consists of income tax on rental profit rather than NIC on the same profit. This is why the calculator shows National Insurance as zero for standard scenarios.

Exception cases can exist where activity is run at a level that resembles a business with substantial additional services, but for mainstream residential landlord setups the default expectation is that NI is not due on rental income itself. If your model is unusual or service-heavy, get case-specific advice.

Worked Examples

Example 1: Basic-rate landlord

Annual rent is £18,000. Allowable expenses are £4,000. Mortgage interest is £5,000. Tax rate assumed is 20%. Taxable rental profit before ownership split is £14,000 (£18,000 minus £4,000). Income tax before credit is £2,800. Section 24 tax credit is £1,000 (20% of £5,000). Estimated tax due is £1,800. NI remains nil for this standard case.

Example 2: Higher-rate landlord

Annual rent is £30,000. Allowable expenses are £6,000. Mortgage interest is £10,000. Tax rate assumed is 40%. Taxable profit is £24,000. Income tax before credit is £9,600. Section 24 credit is £2,000. Estimated tax due is £7,600. This example shows why leverage can push cash tax higher under Section 24: profit is taxed at 40%, while finance relief is only 20%.

Example 3: Joint ownership at different rates

Total property figures: rent £24,000, expenses £5,000, mortgage interest £7,200. Profit before finance credit is £19,000. Owner A has 50% share and is basic rate; Owner B has 50% share and is higher rate. Owner A taxable profit is £9,500 with tax before credit of £1,900, less £720 credit, tax £1,180. Owner B taxable profit is £9,500 with tax before credit of £3,800, less £720 credit, tax £3,080. Combined household tax is £4,260. Same property, different tax outcomes due to different marginal rates.

Example 4: Property allowance comparison

Rent is £9,000. Actual expenses are £600. Mortgage interest is £0. At 20% rate, using actual expenses gives profit £8,400 and tax £1,680. Using the £1,000 property allowance gives profit £8,000 and tax £1,600. In this case, allowance is better by £80. If expenses were £1,500, actual expenses would usually be better than the allowance.

Frequently Asked Questions