Mortgage interest is not deductible

Since 2020 you are taxed on rent less running costs, with a credit worth 20% of the interest. A higher-rate landlord therefore pays tax on money the lender has already taken — the single biggest change in landlord taxation in a generation.

The first £1,000 of property income is exempt

The property allowance works like the trading allowance: exempt below £1,000, and above it you may deduct the £1,000 instead of your expenses if that is larger.

Rent a Room is different and more generous

Letting a furnished room in your own home while you live there gives £7,500 of exemption, not £1,000. It is a separate relief with its own rules.

Making Tax Digital starts in April 2026

Property income above £50,000 moves to quarterly digital reporting from April 2026, £30,000 from 2027 and £20,000 from 2028. It is the largest administrative change landlords have faced.

I am renting out a property — what tax do I pay?

The property allowance, why mortgage interest is no longer deductible, and the quarterly reporting that starts in April 2026.

What changes for you

Mortgage interest is not deductible
Since 2020 you are taxed on rent less running costs, with a credit worth 20% of the interest. A higher-rate landlord therefore pays tax on money the lender has already taken — the single biggest change in landlord taxation in a generation.
The first £1,000 of property income is exempt
The property allowance works like the trading allowance: exempt below £1,000, and above it you may deduct the £1,000 instead of your expenses if that is larger.
Rent a Room is different and more generous
Letting a furnished room in your own home while you live there gives £7,500 of exemption, not £1,000. It is a separate relief with its own rules.
Making Tax Digital starts in April 2026
Property income above £50,000 moves to quarterly digital reporting from April 2026, £30,000 from 2027 and £20,000 from 2028. It is the largest administrative change landlords have faced.

The decisions this opens up

Each works on your own figures and shows every option with the workings. Free, and no sign-up.

Should I hold rental property in a company?Compares holding rental property personally against through a company, with the finance-cost restriction, corporation tax and the cost of getting the money back out all counted.Should I use Rent a Room relief?Compares the £7,500 Rent a Room allowance against deducting your actual costs. The allowance is not automatic above the threshold, and choosing wrong costs real money.How can I reduce my higher-rate tax?Finds the thresholds sitting above and below your income, and shows what a pension contribution to each one is actually worth — including the 60% band and the child benefit charge.

Dates this puts in your diary

5 October after the first tax yearRegister for Self Assessment
April 2026Making Tax Digital, if property income is over £50,000

Run the numbers

Rental Income Tax Calculator Landlord Rental Income Organiser Rental Yield Calculator Tax On Rental Income Landlord Guide

Software that files it for you

Partner links

If you keep your own books, these are the packages that handle Self Assessment and Making Tax Digital.

FreeAgent

4.8

Free optionMTD ready

The freelancer and contractor favourite, free with some bank accounts.

Free forever with a NatWest, Royal Bank of Scotland, Ulster or Mettle business account
Built-in Self Assessment and MTD for Income Tax filing

From £0 with a NatWest, RBS or Mettle account, otherwise about £19/mo

See FreeAgent

QuickBooks

4.6

MTD ready

The big all-rounder with the deepest MTD track record.

Sole Trader plan built specifically for Self Assessment and MTD
Snap and store receipts, automatic bank feeds

From about £10/mo, frequent 90% off intro offers

See QuickBooks

Xero

4.5

MTD ready

The scale-up choice once you have staff, stock or VAT.

Huge app marketplace and the accountant industry standard
Strong for VAT, payroll and multi-user limited companies

From about £15/mo

See Xero

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