What Tax Do I Pay as a Landlord?

Jerelyn Aglibao
Sep 26, 2025
4 min read

If you rent out property in the UK, you will have several tax obligations. This guide explains which taxes you pay, how to work them out, and what reliefs & allowances you may get.

Income Tax on Rental Profits

When you rent out a residential property, you earn rental income. The tax you pay is on the profit: that is, how much you get in rent minus the costs (“allowable expenses”) you can claim.

Allowable expenses include things like:

Maintenance & repairs (not big improvements)
Insurance: buildings, contents, landlord liability
Letting agent fees, management fees
Legal and accounting fees (for letting, renewing a lease, etc.)
Utilities, council tax, etc., if you pay them
“Replacement of domestic items relief” for like-for-like replacements of furnishings, appliances, etc.

You cannot deduct capital improvements (extensions, major renovations) or the cost of buying the property itself.

Tax Rates & Allowances

How much you pay depends on your total taxable income (rental profit plus any other income you have, e.g. salary, pension). Here are the key tax bands for England, Wales, and Northern Ireland (Scotland has slightly different bands).

Band	Taxable Income Range*	Tax Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Over £125,140	45%

**These are for 2025/26 tax year, and are still valid unless changed by government.

Mortgage Interest Relief (Finance Costs)

Since 6 April 2020, for individual landlords with residential properties, you can no longer deduct all your mortgage interest from rental income in the usual way. Instead:

The finance cost (interest etc.) is restricted. You get a tax credit equal to 20% of the finance costs.
If you own the property via a limited company, different rules apply and the full interest can often still be deducted.

The Property Allowance

If your rental income is small, there is a simple allowance:

The first £1,000 of property rental income each year is tax-free under the “property allowance.”
If you choose to use that allowance, you give up the right to claim other expenses for that income in that particular tax year.

Self Assessment & Reporting

You must tell HMRC about your rental income & profits via a Self Assessment tax return.

Important points:

If you do not already file a return, you must register by 5 October after the end of the tax year in which you have rental profits.
Deadline for filing the return is 31 January following the end of the tax year (for online returns).
You must keep good records: rent received, expenses incurred, invoices/receipts, bank statements. HMRC may ask to see them.

Capital Gains Tax (CGT) when You Sell

If you sell a property that has increased in value (and it’s not your main home / you didn’t live in it as your principal residence), you may need to pay Capital Gains Tax.

There is an annual CGT allowance (the part of the gain that is tax-free). For 2025/26 it is £3,000 for individuals disposing of residential property.
CGT rates on residential property gains are higher than on many other assets. For gains above the basic rate band, the rate is 18%, and for higher/additional rate taxpayers 24%.

Other Taxes & Things to Watch

Stamp Duty / SDLT: when you buy a property (especially second homes or buy-to-lets), there are stamp duty land tax rules.
Council Tax / Utilities: who pays them (you or the tenant) affects whether they’re allowable expenses.
Non-resident landlords may have slightly different rules/withholding, etc.

Example:

Rent collected in a year: £15,000

Allowable expenses (repairs, insurance, agent fees, etc.): £3,000

Net rental profit: £12,000

If you also earn £30,000 from another job, your total taxable income is £42,000. That puts you in the basic rate (20%) band. So you pay 20% on the portion of profit that falls inside that band.

Mortgage interest relief is via a 20% tax credit, not a full deduction.

When Using a Limited Company

If you own your rental property through a limited company, your profits will be taxed under Corporation Tax. The company can also deduct full mortgage interest/finance costs (unlike individuals), and when you take profits out of the company (e.g. via dividends or salary), you will have tax on those too. So you must plan your structure and timing well.

Here are the current corporation tax rates and thresholds (2025-26).

Profit level (Taxable Profits)	Corporation Tax Rate
Up to £50,000	19% (small profit rate)
Between £50,000 and £250,000	Marginal Relief applies — an effective rate between 19% and 25% depending on how much your profit is.
Over £250,000	25% (main rate)

Key things to know:

If your limited company has associated companies, the £50,000 lower threshold and the £250,000 upper threshold are divided between them. This can affect which rate (or combination via marginal relief) applies.
The Corporation Tax rate applies to all profits of the company (including gains from selling assets) after allowable expenses.

What to Do Now

If you are a landlord (or planning to become one), you should:

Work out your expected rental income & likely expenses.
Decide whether owning through a limited company makes sense for you.
Keep excellent records of all income, costs, invoices, etc.
File your Self Assessment properly & on time.
Consider getting professional advice to ensure you use all reliefs and allowances.