How much tax do landlords pay on rental income?

Rental profit is taxed at your usual rates outside Scotland: 20%, 40% or 45% in 2026-27. From 6 April 2027, England and Northern Ireland use property rates of 22%, 42% and 47%. Mortgage interest relief rises from 20% to 22%.

Rental profit is your rent minus allowable expenses. It is added to your other income, such as wages or a pension, and taxed at whatever rate it falls into. The 2026-27 rates on this page are for England, Wales and Northern Ireland. The 2027-28 property rates are for England and Northern Ireland: under Finance Act 2026, from 2027-28 the Senedd sets a Welsh property rate and the Scottish Parliament can set its own property rates.

Rates and bands

The personal allowance shrinks by £1 for every £2 of income over £100,000. The government's technical note says the allowance and bands are unchanged by the new rates. From 2027-28, rental profit is taxed after wages, trading and other income, and your personal allowance is used against that other income first.

What you can deduct

GOV.UK lists allowable expenses as the day-to-day costs of running the let, such as letting agents' fees, accountants' fees, insurance, repairs (not improvements), utility bills you pay, ground rent and service charges, Council Tax, cleaning, gardening and advertising. You can also claim relief for replacing furnishings and appliances. Buying or improving the property is not an allowable expense.

Instead of your actual costs, you can claim the £1,000 property allowance. If you let a room in your own home, the Rent a Room scheme lets you earn up to £7,500 tax-free, or £3,750 each if you share the income.

Mortgage interest works differently. Individual landlords cannot deduct it. Instead you get a tax reduction of 20% of the interest, or 22% from 2027-28. The reduction is on the lowest of your finance costs, your property profit, or your income above the personal allowance. Anything left over carries forward, but it cannot create a refund.

What this means for you

Two landlords each collect £14,000 rent, spend £3,000 on allowable expenses and pay £4,000 mortgage interest. Each has a rental profit of £11,000.

The 2027-28 row assumes the same figures and unchanged bands: £2,420 less £880 for the first landlord, and £4,620 less £880 for the second. The higher-rate landlord gets relief at only 20% or 22% on interest, which is why Section 24, as the interest rule is known, bites harder above £50,270. Our free landlord tax calculator works out the 2025-26 and 2026-27 figures with your own rent, costs, interest and wages.

Both landlords have more than £10,000 of rent, so both must send a tax return. Wages do not count towards Making Tax Digital, so with £14,000 of rent and no self-employed turnover, neither is over the £20,000 threshold and neither needs it on these figures. The free MTD check works this out for you.

Steps to work out your tax

1. Add up the rent you received in the tax year, 6 April to 5 April. If you own jointly, take only your share.
2. Take off your allowable expenses, or the £1,000 property allowance if that is more.
3. Add the profit to your other income to see which band it falls into.
4. Work out the tax on the profit at that band's rate.
5. Take off 20% of your mortgage interest (22% from 2027-28), within the limits above.
6. Pay by 31 January after the tax year. Unless your last bill was under £1,000 or more than 80% of it was collected at source, you also make payments on account on 31 January and 31 July.

All your residential lets in the UK count as one property business, so a loss on one can be set against profit on another. A loss left over carries forward against future profits of the same business. The landlord section has more guides on tax and running your lets.