How is tax on rental income worked out?

For landlords and people who rent out a property or a room.

Applies to: England, Scotland, Wales, Northern Ireland Last checked against official sources: 6 October 2026

Rental profit is added to your other income and taxed at your normal Income Tax rate.

The first £1,000 of rental income is tax free under the property allowance.
You can take off allowable expenses such as letting agent fees, insurance and repairs.
Individual landlords cannot deduct mortgage interest, but get a 20% tax reduction instead.
If your income is over £2,500 after expenses, or £10,000 before, you must file a Self Assessment return.
Letting a room in your own home may be tax free up to £7,500 under Rent a Room.

Key facts

First £1,000 tax free
Mortgage interest: 20% tax credit
Self Assessment over £2,500 profit
Rent a Room: £7,500 tax free

What rental income tax is

There is no separate rental tax. Your rental profit is added to your other income, such as wages or pension, and you pay Income Tax on it at your usual rate. Profit means rent received minus allowable expenses.

Allowable expenses

You can take off the day-to-day costs of running the let, such as:

letting agent fees and accountant fees
legal fees for lets of a year or less
buildings and contents insurance
repairs and maintenance (but not improvements)
utility bills, ground rent, service charges and Council Tax, if you pay them
services such as cleaning or gardening

You can also claim relief when you replace furnished items such as beds, sofas, carpets or fridges, if the old item was for the tenant's use.

Mortgage interest

If you are an individual landlord of a home, you cannot take mortgage interest off your rent as an expense. Instead you get a tax reduction of 20% of your finance costs. The reduction is limited to the lowest of your finance costs, your property profits, or your income above the Personal Allowance.

Worked example, 2026/27

You get £12,000 rent a year. You pay £2,000 in agent fees and insurance, and £4,000 in mortgage interest.

Profit: £12,000 minus £2,000 = £10,000
Mortgage interest tax reduction: 20% of £4,000 = £800

	Basic rate (20%) taxpayer	Higher rate (40%) taxpayer
Tax on £10,000 profit	£2,000	£4,000
Less 20% reduction	£800	£800
Tax to pay	£1,200	£3,200

This assumes your other income already uses your Personal Allowance.

Tax-free amounts

Property allowance: the first £1,000 of rental income is tax free. If you earn more, you can deduct £1,000 instead of your actual expenses.
Rent a Room Scheme: if you let furnished rooms in the home you live in, you can earn up to £7,500 a year tax free. This is £3,750 if you share the income with someone else.

When to tell HMRC

Rental income	What to do
£1,000 or less	Usually nothing
£1,000 to £2,500	Contact HMRC
Over £2,500 after expenses, or £10,000 before expenses	File a Self Assessment tax return

If you need to file, register by 5 October after the end of the tax year you had the income.

Making Tax Digital

Landlords and sole traders with qualifying income over £50,000 in 2024/25 had to start using Making Tax Digital from 6 April 2026. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.

If you live in Scotland, Wales or Northern Ireland

The rules for working out rental profit are the same across the UK. If you are a Scottish taxpayer, Scottish Income Tax rates and bands are used instead.

Related guides

Where this comes from

Get it done

This takes you to the official service, which is free to use.

Check tax on rental income

Common questions

Can landlords claim mortgage interest?

Not as an expense. Instead you get a tax reduction of 20% of your finance costs.

When must I tell HMRC about rental income?

If you need to file a tax return, register by 5 October after the tax year you had the income.

Do landlords need Making Tax Digital?

Yes, if your qualifying income from property and self-employment is over the threshold. It started from 6 April 2026 for income over £50,000.

Official sources

1.Renting out a property: paying tax (GOV.UK)www.gov.uk/renting-out-a-property/paying-tax
2.Changes to tax relief for residential landlords: how it's worked out (GOV.UK)www.gov.uk/guidance/changes-to-tax-relief-for-residential-landlords-how-its-worked-out-including-case-studies
3.Rent a room in your home: the Rent a Room Scheme (GOV.UK)www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
4.Check if you're eligible for Making Tax Digital for Income Tax (GOV.UK)www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax

Checked against GOV.UK on 6 October 2026

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