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What is Rental profit?
Last verified 31 October 2026
Rental profit is your rental income minus your allowable expenses, or minus the property allowance if you claim that instead. It is the figure HMRC taxes, and it is worked out across all your UK lettings together.
Why it matters to landlords
You deduct costs paid wholly and exclusively for the rental business, such as agent fees, insurance, repairs and accountancy. Capital improvements and the capital part of a mortgage payment are not deductible. For residential lets, mortgage interest is not deducted from profit at all: it is handled through the basic rate tax reduction instead.
If expenses are higher than income you have a loss. HMRC says losses are normally set only against future profits of the same rental business. Lets to relatives at a reduced rent are treated as uncommercial, and expenses are then limited to the rent received. If you stop letting and restart within three years, earlier losses may still be used where it is the same property business.
Example
Karen receives £14,400 in rent over the year. She pays an agent £1,440, insurance of £420 and £900 for a boiler repair. Her allowable expenses are £2,760, so her rental profit is £11,640. Her £5,200 of mortgage interest is not part of this calculation.
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