How to Use the UK Rental Income Tax Calculator
The UK Rental Income Tax Calculator computes tax on rental income for 2025/26, correctly applying Section 24 (the mortgage interest restriction), the property income allowance (£1,000), allowable expenses, and the 20% basic rate mortgage interest tax credit.
Enter your rental income, allowable expenses (agent fees, repairs, insurance, professional fees), and mortgage interest. The calculator shows your taxable rental profit, income tax at your marginal rate, the mortgage interest credit applied, and your final tax liability.
Section 24 is the most critical nuance for leveraged landlords: you can no longer deduct mortgage interest from rental income to calculate taxable profit. Instead, you pay tax on gross profit (rent minus other expenses) and then receive a basic rate (20%) credit for mortgage interest. Higher-rate taxpayers pay an extra 20% in tax compared to the pre-2017 rules.
📊 Worked Example
£15,000 rental income, £3,000 allowable expenses, £8,000 mortgage interest, higher-rate taxpayer:
- Rental profit (after expenses): £12,000
- Tax at 40%: £4,800
- Less 20% mortgage credit (20% × £8,000): −£1,600
- Net tax: £3,200
- Pre-Section 24, tax would have been: £1,600 — doubled
Common Use Cases
- ✅ Calculating your annual rental income tax liability for self-assessment
- ✅ Understanding how Section 24 affects your rental profit
- ✅ Checking whether incorporating (limited company) would reduce your tax
- ✅ Planning deductible expenses to reduce taxable rental income
- ✅ Understanding whether the property income allowance (£1,000) applies
- ✅ Comparing rental income tax for basic rate vs higher rate landlords
Frequently Asked Questions
What expenses can a landlord deduct from rental income?
Allowable expenses include: letting agent fees, management fees, property insurance, repairs and maintenance (not improvements), utility bills if you pay them, cleaning costs, professional fees (accountant, solicitor), and advertising costs. Mortgage interest is no longer deductible — instead it qualifies for the 20% basic rate credit under Section 24.
What is the property income allowance?
All landlords have a £1,000 property income allowance per tax year. If your gross rental income is under £1,000, it's tax-free. If above £1,000, you can either claim the £1,000 allowance (and pay tax on income minus £1,000) or deduct actual expenses — whichever gives you lower taxable income.
Should I put my rental property in a limited company?
A limited company pays corporation tax (19–25%) on rental profits and Section 24 doesn't apply — you can deduct the full mortgage interest. However, there are costs: annual accounts, additional administration, and you pay income tax when you draw money out. For higher-rate taxpayers with high-interest mortgages, incorporation often saves substantial tax.
Do I need to complete a self-assessment return for rental income?
Yes. If your rental income exceeds £2,500 after deducting allowable expenses (or £10,000 before expenses), you must complete a self-assessment tax return. Register with HMRC for self-assessment by 5 October following the end of the tax year in which you started letting.
What is the furnished holiday letting (FHL) regime?
Properties qualifying as Furnished Holiday Lettings (meeting minimum occupancy requirements) previously had advantageous tax treatment including mortgage interest deductibility and capital gains relief. The FHL regime was abolished from April 2025. FHL properties are now taxed the same as standard buy-to-let properties.