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How much tax do I need to pay on rental income?

Do you pay tax on rental income? Yes - UK landlords pay income tax on their rental profits at the standard rates of 20%, 40% or 45%, depending on your total income.

But you're only taxed on your profit, not the full rent you receive. You can deduct allowable expenses like insurance, repairs, letting agent fees, and accountancy costs, and there's a £1,000 tax-free property allowance if your rental income is small.

In this guide we explain how rental income is taxed, what you can and can't claim as expenses, when to declare your income to HMRC including the new Making Tax Digital deadlines from April 2026 and how to work out what you'll actually owe.

07.04.26

By Heath Alexander-Bew

This content was factually correct when written but may not reflect current developments or information.

How much tax do I need to pay on rental income?

If you rent out property, you’ll need to pay tax on any profit you make. You can work this out by deducting all your allowable expenses from your rental income.

While it sounds like a simple calculation, tax on rental income can be complex to navigate – especially as different reliefs apply to different types of property let.

To ensure you don’t get caught out, here’s what you need to consider when it comes to paying tax on your rental income.

Do you have to pay income tax on rental income?

The short answer is yes, but rental income isn’t just the rent you receive; it includes any money you earn from letting out your property. This could be money kept from a deposit or money for services – for example, if tenants pay for communal areas to be cleaned.

Let’s take an example:

  • You receive £5,000 in rental income for the year

  • You keep an additional £200 from your tenant’s deposit to cover repairs

  • You also keep £100 for cleaning

  • Your total rental income is £5,300.

When to declare tax on rental income?

The good news is that if you rent out property you own personally, you’re entitled to a £1,000 property allowance. This is the income you’re allowed to receive, tax-free, and there’s no need to declare it to HMRC (HM Revenue & Customs). Alternatively, you can claim for all expenses rather than the property allowance.

If you earn anything between £1,000 and £2,500 from your rental, after allowable expenses, you’ll need to let HMRC know by contacting them directly – they may be able to collect the tax you owe via the PAYE system. Any income over £2,500 needs to be declared on a Self-Assessment tax return.

From 6th April 2026, landlords with property income exceeding £50,000 must comply with Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA). Those earning £30,000-£50,000 from property will be required to comply from 6th April 2027. It’s expected that those earning between £20,000-£30,000 from property will be expected to comply from April 2028.

How much rent is taxable?

You’re only taxed on the profit you earn – this is your total rental income minus any allowable expenses.

Allowable expenses generally include anything you spend on maintaining and managing your property, including:

  • Letting agent fees

  • Landlord insurance

  • Repairs

  • Utility bills

  • Council tax

  • Services you pay for, such as cleaning and gardening

If you own more than one rental property in the UK, you can add all your allowable expenses together.

You may also be entitled to certain tax reliefs, but these vary according to the type of property you own. For example, if you’re renting out residential property, you can also claim ‘replacement of domestic items relief’ which covers the cost of replacing items you provide, such as sofas, curtains and carpets. This relief no longer applies to Furnished Holiday Lets (FHLs).

Commercial property also benefits from capital expenses for assets, including lifts, escalators and electrical systems.

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How much tax will I have to pay on my rental income?

Tax is charged depending on the band your income falls into. In England, there are four bands:

  • Your personal allowance – you pay 0% on earnings up to £12,570

  • The basic rate – you pay 20% on earnings between £12,571 and £50,270

  • The higher rate – you pay 40% on earnings between £50,271 and £150,000

  • The additional rate – you pay 45% on anything over £150,000

It’s worth remembering that rental earnings could push you over the threshold into the next tax band. For example:

  • You earn £45,000 from your day job

  • You receive £8,000 in rent but have allowable expenses of £1,000

  • Your total rental income is £7,000 (£8,000 minus £1,000)

  • Your total income is £52,000

  • As the higher rate tax threshold starts at £50,271, you’ll pay 40% tax on the £1,729 that tips you over the limit

From April 2027, higher, property-specific tax rates will take effect.

Can I still get buy-to-let mortgage tax relief?

Mortgage tax relief has been slowly phased out, and from April 2020, you can't deduct mortgage interest from your rental earnings anymore. Instead, your tax liability is reduced by a 20% tax credit of the interest paid.

From April 2027, the tax credit will increase to 22%.

Do I have to pay National Insurance payments if I run a property business?

If you are running a property business, you no longer need to pay Class 2 National Insurance contributions from April 2025.

You are considered to be running a property business if:

  • Your primary occupation is being a landlord

  • You let multiple properties

  • You actively buy properties for rental purposes

You may want to make voluntary Class 2 National Insurance contributions to be eligible for the State Pension.

When do I pay tax on rental income?

You’ll need to pay tax on the profits you make in each financial year (6 April to 5 April the following year).

If you’re filling out a paper Self-Assessment tax return, you’ll need to submit it by 31 October of the following financial year. Tax returns completed online won’t need to be submitted until the 31st January. For example, paper returns for the year 2025-2026 will need to be submitted by 31 October 2026 or 31 January 2027 if done online.

Advice on getting it right

There’s a lot to think about when it comes to working out the tax you owe on your rental income. It’s also crucial to get it right because getting it wrong could result in hefty fines and penalties.

As independent insurance brokers and financial planners, we’re here to give you the advice you need to manage your money and your business. To find out how we can help, speak directly to a member of the team by calling 01603 218000.

Tax is a complicated topic, and the treatment depends on your individual circumstances and may be subject to change in the future. You should always consult a tax professional for the details. Tax laws can change, and so can your personal circumstances, so you may need to seek advice from a qualified accountant. Please also bear in mind that the Financial Conduct Authority does not regulate tax advice.

This article was written with help from Norwich Accountancy. If you would like tax advice, you can contact Norwich Accountancy on 01603 630882 or send an email.

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