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Rental Income Tax Calculator

Estimate income tax on UK rental profits for 2026/27, including the mortgage interest restriction and property allowance.

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Since April 2020, mortgage interest is no longer deducted from rental profit. Instead, you get a 20% tax credit on the interest amount. This hits higher-rate taxpayers hardest. Alternatively, if your gross rental income is £1,000 or less, or if it is more beneficial, you can use the £1,000 property income allowance instead of actual expenses.

Tax on Rental Income

Income tax on rental profit
£0

How rental income is taxed

Rental profit is added to your other income and taxed at your marginal rate. Your rental profit is gross income minus allowable expenses (repairs, letting agent fees, insurance, council tax, etc.) — but not mortgage capital repayments or your own time. Since April 2020, mortgage interest is restricted: instead of deducting the interest from your rental profit, you receive a 20% tax credit equal to the interest. Higher-rate taxpayers (40%) therefore only get 20% relief, not 40%, increasing their effective tax burden.

The £1,000 property income allowance lets you earn up to £1,000 in rental income tax-free without needing to declare it. If your expenses are less than £1,000, the allowance is more beneficial. You cannot use both the allowance and actual expenses on the same property.

From April 2027, the tax rates on property income are expected to rise by 2% (to 22%, 42%, 47%), mirroring the change to savings income. This is not yet in force for 2026/27.

FAQ

Can I deduct mortgage capital repayments?
No — only the interest portion of mortgage payments is relevant for tax purposes, and even that is now restricted to a 20% credit rather than a deduction. Capital repayments build equity and are not an expense.
What expenses can I deduct?
Allowable expenses include: letting agent fees, buildings and contents insurance, repairs and maintenance (not improvements), council tax and utilities (if paid by you), service charges, accountancy fees, and ground rent.
What is the property income allowance?
If your total gross rental income is £1,000 or less, you don't need to report it. If it is more, you can still choose to deduct £1,000 as a flat allowance instead of actual expenses — useful if your expenses are low.
What are my reporting obligations?
If rental income exceeds £1,000 gross per year (or your rental profit exceeds £2,500 after expenses), you must file a Self Assessment return. From April 2026, landlords with rental income above £50,000 must use Making Tax Digital (MTD) software to submit quarterly updates.