Rental Income Tax in the UK: What Landlords Can Claim in 2026

How rental income is taxed in the UK

If you let property in your own name, you pay Income Tax on your rental profit, which is your rental income minus allowable expenses. The profit is added to your other income, such as wages or a pension, and taxed at your usual rates. For the 2026 to 2027 tax year in England and Northern Ireland, that means 20%, 40% or 45% depending on your total income. Scotland sets its own Income Tax rates.

Most landlords report rental income through Self Assessment. If your rental income is more than £1,000 a year before expenses, you will normally need to tell HMRC. Below that, the £1,000 property allowance means you usually do not need to declare it. You can use the allowance instead of claiming actual expenses, but not as well as them.

Landlords who let through a limited company are taxed differently. The company pays Corporation Tax on its profits, and you pay tax personally when you take money out as salary or dividends. The rest of this guide focuses on individual landlords.

Allowable expenses UK landlords can claim

You can deduct costs incurred wholly and exclusively for the rental business. The main allowable expenses include:

• Letting and management fees paid to an agent, including tenant-find, rent collection and full management fees.
• Repairs and maintenance, such as fixing a boiler, repainting between tenancies or replacing broken roof tiles.
• Insurance, including landlord buildings, contents and rent guarantee cover.
• Ground rent and service charges on leasehold flats.
• Council tax, utilities and broadband, but only where you pay them rather than the tenant.
• Safety and compliance costs, such as gas safety checks, electrical safety reports and EPCs.
• Professional fees for accountants, and some legal costs, such as for drawing up a tenancy agreement.
• Advertising, referencing and inventories, plus travel to the property for the business.

Keep receipts and invoices for everything you claim. HMRC can ask to see evidence, and good records also make Making Tax Digital far easier.

What you cannot claim (and why US advice doesn't apply)

Several things that US articles treat as standard deductions do not apply to UK residential landlords.

• Depreciation: you cannot claim depreciation or capital allowances on a residential dwelling or on the furniture and appliances inside it.
• Improvements: costs that improve the property rather than repair it, such as an extension or a loft conversion, are capital spending. They are not deductible from rental income, though they may reduce Capital Gains Tax when you sell.
• The purchase price and buying costs such as Stamp Duty Land Tax are capital costs.
• Property taxes: the UK has no direct equivalent of US property tax. Council tax is normally paid by the tenant, and is only deductible when the landlord pays it, for example while the property is empty.
• Mortgage capital repayments are never deductible.

There is one useful relief instead of depreciation. Replacement of domestic items relief lets you deduct the cost of replacing items such as beds, sofas, white goods and carpets on a like-for-like basis. It does not cover buying them for the first time.

Mortgage interest and the Section 24 restriction

Since April 2020, individual landlords of residential property cannot deduct mortgage interest or other finance costs from their rental income. This rule is often called Section 24, after the part of the Finance Act 2015 that introduced it. Instead, you get a tax reduction worth 20% of your finance costs.

Finance costs include mortgage interest, interest on loans to buy furnishings, and fees for arranging or ending a mortgage. The tax reduction is 20% of the lowest of three figures: your finance costs for the year (plus any unused amount carried forward), your property profits, or your adjusted total income above the personal allowance. Any unused finance costs carry forward to later years.

For basic-rate taxpayers, the result is broadly similar to the old system. Higher and additional-rate taxpayers feel the difference most, because their mortgage interest is now relieved at 20% instead of 40% or 45%. In some cases, the rule can also push a landlord into a higher tax band, because profit is now calculated before finance costs.

A worked example of Section 24

Here is a simplified example for a higher-rate taxpayer in England in the 2026 to 2027 tax year. It ignores other reliefs and is only meant to show how the calculation works.

• Annual rent received: £15,000
• Allowable expenses (agent fees, insurance, repairs, safety checks): £3,000
• Mortgage interest: £6,000

Under Section 24, the rental profit is £15,000 minus £3,000, which is £12,000. Mortgage interest is not deducted. Tax at 40% on £12,000 is £4,800. The landlord then receives a tax reduction of 20% of £6,000, which is £1,200. The tax due on the rental profit is £3,600.

Before Section 24, the same landlord would have deducted the £6,000 interest first, giving a profit of £6,000 and tax at 40% of £2,400. The restriction adds £1,200 to the bill. For a basic-rate taxpayer, the tax due would be about the same under both systems.

New property income tax rates from April 2027

From 6 April 2027, rental profit will be taxed at its own property income rates, two percentage points above the main rates: a property basic rate of 22%, a property higher rate of 42% and a property additional rate of 47%. These were announced at the Autumn Budget 2025 and legislated in the Finance Act 2026.

The mortgage interest tax reduction will rise in line with the new property basic rate, from 20% to 22%. For a basic-rate landlord, the extra tax on profits and the higher relief broadly cancel out on finance costs, but profits after costs are taxed two points higher. The rules on how the personal allowance is used against different types of income are also changing, so that it is set against other income before property income.

Using the example above in 2027 to 2028, tax at 42% on £12,000 would be £5,040, less a 22% credit of £1,320, giving £3,720, around £120 more than in 2026 to 2027. Scotland sets its own rates, and Wales will need to set its rates for property income separately. Companies are not affected by these rates.

Making Tax Digital for landlords

Making Tax Digital for Income Tax changes how landlords keep records and report to HMRC. Instead of one annual return based on paper records, you keep digital records using compatible software and send HMRC a summary every quarter, followed by a final declaration after the tax year ends.

It applies based on your qualifying income, which is your gross income from property and self-employment combined, before expenses:

• From 6 April 2026, if qualifying income is over £50,000.
• From 6 April 2027, if it is over £30,000.
• The government plans to bring the threshold down to £20,000 from April 2028.

Jointly owned property counts towards each owner's share of the income. If MTD applies to you, choose software early and get used to keeping records as you go. If you use a managing agent, ask whether their monthly statements can feed your software, which saves a lot of manual entry.

Practical tips for keeping on top of landlord tax

A few habits keep tax simple and help make sure you claim everything you are entitled to:

• Keep a separate bank account for rent and property costs, so your records are clean.
• Record expenses as they happen and keep digital copies of receipts and invoices.
• Separate repairs from improvements, and keep improvement invoices for Capital Gains Tax when you sell.
• Track finance costs separately from other expenses, because they are treated differently.
• Put money aside for your tax bill, especially with the higher rates from April 2027.

Using a managing agent can also simplify things. Agents usually provide monthly and annual statements showing rent received, fees and repair costs, and their fees are themselves an allowable expense. Some landlords also find that the time saved on paperwork is worth as much as the tax itself.

The bottom line

UK landlords pay tax on rental profit, can deduct the everyday running costs of the let, cannot claim depreciation on a residential property, and get only a basic-rate tax credit for mortgage interest. The rates rise to 22%, 42% and 47% from April 2027, and Making Tax Digital is already live for larger landlords. Good records make all of it easier, and a managing agent's monthly statements are a ready-made record of rent and costs. To see what an agent would charge to manage your property, compare local letting agents.

This article is general information about UK tax rules as of October 2026 and is not tax or financial advice. Tax treatment depends on your circumstances and can change. For advice on your own position, see HMRC's guidance on GOV.UK or speak to a qualified accountant or chartered tax adviser.