How is landlord tax calculated?
Last verified 23 October 2026
You add up your rental income and take away allowable expenses to get your profit, then add that profit to your other income. Income Tax is charged at your normal rates. Mortgage interest is not deducted; you get a basic rate tax reduction instead.
If you let more than one UK property, you combine all the income and expenses into one figure. Instead of claiming expenses, you can use the property allowance of up to £1,000 a year, but you cannot claim both. For the 2026 to 2027 tax year the personal allowance is £12,570. Outside Scotland, the basic rate is 20% on £12,571 to £50,270, the higher rate is 40% on £50,271 to £125,140 and the additional rate is 45% above that. Scotland has different bands.
The personal allowance falls by £1 for every £2 of adjusted net income over £100,000. Relief for residential finance costs is a tax reduction at the basic rate, and it cannot create a refund. From 6 April 2027, property income in England, Wales and Northern Ireland will have its own rates of 22%, 42% and 47%, and finance cost relief will be given at 22%.
Read next
- What is Property allowance? →
- Rental Income Tax Tips for UK Landlords (2026) →
- Rental income tax calculator →
Sources
- GOV.UK: Income Tax when you rent out a property: working out your rental income
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Change to tax rates for property, savings and dividend income, technical note