Legal & Tenure

How Rental Income Is Taxed in the UK — A 2026 Overview for Landlords

Rental income is taxed as part of your total income in the UK, meaning the rate you pay depends on which tax band you fall into after deducting allowable expenses. This guide explains the full picture — from income tax bands to the property allowance — so you know exactly where you stand.

Published: 1 Jan 2026 · Updated: 1 Mar 2026 · 6 min read

How Rental Income Is Taxed in the UK

If you receive rental income from a residential or commercial property in the UK, that income is subject to Income Tax. It is added on top of any other income you receive — such as employment earnings or pension payments — and the total determines which tax band applies.

For 2026/27 the Income Tax bands in England, Wales, and Northern Ireland are:

Band	Taxable income	Rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 – £50,270	20%
Higher rate	£50,271 – £125,140	40%
Additional rate	Over £125,140	45%

Scotland operates different bands; Scottish taxpayers pay Scottish Income Tax on non-savings and non-dividend income, which includes rental profits.

How Your Rental Profit Is Calculated

Your taxable profit is not your gross rent — it is your gross rent **minus allowable expenses**. HMRC allows landlords to deduct legitimate costs incurred wholly and exclusively for the purpose of renting the property. Common deductions include letting agent fees, building and contents insurance, repairs and maintenance, accountancy fees, and ground rent or service charges.

Mortgage interest, however, is no longer fully deductible for individual landlords. Under the Section 24 rules (in force since April 2020), you instead receive a 20% basic rate tax credit on your finance costs. This means higher and additional rate taxpayers no longer gain full relief — a significant change covered in detail in our [Section 24 mortgage interest restriction guide](/guides/section-24-mortgage-interest-restriction-landlords).

The £1,000 Property Allowance

If your gross rental income is £1,000 or less in a tax year, it is exempt from Income Tax under the property allowance. You do not need to declare it. If your income exceeds £1,000, you can choose either to deduct actual expenses or to use the £1,000 allowance as a flat deduction — but you cannot use both. For most landlords with genuine costs, deducting actual expenses will be more beneficial.

What You Must Declare

All rental income must be reported to HMRC via Self Assessment if your gross rental receipts exceed £1,000 in the tax year, or if you have tax to pay. You register for Self Assessment with HMRC, file your tax return, and pay any tax owed by **31 January** following the end of the relevant tax year. The 2025/26 tax year ends on 5 April 2026; the online filing deadline is 31 January 2027.

Late filing incurs an automatic £100 penalty, with further daily and percentage-based penalties the longer you delay.

Using a Calculator

Understanding your liability before filing can prevent nasty surprises. Our [rental income tax calculator](/rental-income-tax-calculator) lets you enter your rental income, expenses, mortgage interest, and other income to produce an accurate estimate of the tax you owe for 2026/27.

Key Points to Remember

Rental profit is added to all other income before tax bands are applied.
You can deduct most genuine landlord expenses, but **not** the capital cost of improvements.
Mortgage interest now gives only a 20% basic rate tax credit, not a full deduction.
The Self Assessment online filing deadline is **31 January** each year.
Losses from a rental business can be carried forward to offset future rental profits.

Whether you are a first-time landlord or managing a portfolio, understanding how your rental income is taxed is the essential starting point for sound property finance.