Rental Income Tax Calculator 2026/27: Work Out Tax on Your Property

Use the rental income tax calculator

Pop your annual rent and your running costs into the tool above and it returns your taxable rental profit and the income tax due on it for 2026/27. Add your salary, pension or self-employment income too, because rent doesn't sit in its own little pot, it stacks on top of everything else you earn and is taxed at whatever rate you've already reached.

How rental income is taxed in the UK

Letting out a property is treated as a property business, and HMRC taxes the profit, not the rent. The plain-English formula the rental income tax calculator uses is:

Taxable rental profit = total rent received − allowable expenses − any unused property allowance

That profit is then added to your other income and taxed through the normal income tax bands. There's no separate "landlord rate". If you're already a basic-rate taxpayer, the first slice of rental profit is taxed at 20%; if it tips you into the higher-rate band it's taxed at 40% from that point up. For 2026/27 the Personal Allowance is £12,570, the 20% basic rate runs up to £37,700 of taxable income (£50,270 of total income), 40% applies above that to £125,140, and 45% kicks in beyond £125,140.

One thing that catches new landlords out: rental income counts towards your total income for the year, so even a modest profit can push your salary over a threshold. A £48,000 salary plus £4,000 of rental profit means part of that rent is taxed at 40%, not 20%, even though the rent on its own looks small.

Cash basis vs accruals

Most individual landlords now use the cash basis by default: you count rent in the tax year you actually received it and expenses in the year you paid them. It's simpler and usually fine for one or two properties. You can elect for traditional accruals accounting instead if it suits you, but for the typical private landlord the cash basis is the sensible starting point.

Allowable expenses for landlords

The expenses you can deduct are those incurred wholly and exclusively for the letting. Get these right and your taxable profit, and your bill, drops. Common allowable costs include:

• Letting agent and management fees
• Buildings and contents insurance
• Repairs and maintenance (mending a boiler, repainting, replacing a broken window) but not improvements that add value
• Ground rent, service charges and council tax or utility bills you pay during void periods
• Accountancy fees for the property accounts
• Replacing domestic items like a worn-out sofa, fridge or carpet on a like-for-like basis (Replacement of Domestic Items relief)

The repairs-versus-improvement line is the one HMRC scrutinises. Replacing a tired single-glazed window with a similar new one is a repair. Knocking through to add a second bathroom is a capital improvement, so it can't be deducted from rental profit, though it may reduce a future capital gains bill when you sell. Our capital gains tax on property calculator handles that side.

The £1,000 property allowance

If your gross rental income for the year is £1,000 or less, it's covered by the property allowance and you usually don't need to declare it at all. If you receive more than £1,000, you have a choice for that property income: deduct your actual allowable expenses as above, or claim the £1,000 allowance as a flat deduction instead. You can't do both.

The allowance only beats real expenses when your costs are tiny, for example a parking space or a lock-up garage you let with almost no outgoings. For a normal residential let with agent fees, insurance and repairs, your actual expenses will nearly always exceed £1,000, so you'd claim those instead. The calculator lets you compare both routes.

Mortgage interest and the 20% tax credit

This is the rule that reshaped landlord taxation, and the one most people get wrong. Since the phase-out completed, you can no longer deduct mortgage interest as an expense from your rental profit. Instead you get a basic-rate tax credit worth 20% of the interest, applied after your tax is calculated.

For a basic-rate taxpayer the effect is broadly neutral. For a higher-rate taxpayer it stings, because the profit is taxed at 40% but the interest relief is capped at 20%. That's why two landlords with identical properties can owe very different amounts. If your let is heavily mortgaged and you pay higher-rate tax, the dedicated Section 24 landlord tax calculator models that interest restriction in detail.

How the calculator works

The rental income tax calculator runs the figures in this order:

• Adds up your rent received for the year
• Subtracts your allowable expenses (or the £1,000 property allowance, whichever you choose)
• Stacks the resulting profit on top of your other taxable income
• Applies the 2026/27 income tax bands to work out the tax on the rental slice
• Deducts the 20% basic-rate credit for any mortgage interest you entered

It gives you an estimate of the income tax on the rent. Your overall Self Assessment position also depends on your other income, your tax code and anything already collected through PAYE, so treat the output as a guide to the rental portion rather than your final bill.

Worked example: a teacher with one buy-to-let

Take Priya, a secondary school teacher in Leeds earning a £41,000 salary. She lets a one-bed flat she bought a few years ago and receives £10,800 in rent over the year (£900 a month). Her allowable costs are:

• Letting agent fees: £1,296
• Landlord insurance: £280
• Repairs (new boiler part, repainting): £640
• Annual gas safety and small maintenance: £184

Total allowable expenses = £2,400. Her mortgage interest for the year is £4,200.

Step 1 - taxable rental profit: £10,800 − £2,400 = £8,400. (Mortgage interest is no longer deducted here; it becomes a credit later.)

Step 2 - where does the profit sit? Priya's £41,000 salary already uses her £12,570 Personal Allowance and a chunk of the basic-rate band. The higher-rate threshold is £50,270 of total income. She has £50,270 − £41,000 = £9,270 of basic-rate room left. Her £8,400 profit fits inside it, so it's all taxed at 20%: £8,400 × 20% = £1,680.

Step 3 - mortgage interest credit: 20% of £4,200 = £840. Tax after the credit: £1,680 − £840 = £840.

So Priya pays roughly £840 of income tax on her rental profit. Now imagine her salary was £49,000 instead. The same £8,400 profit would spill over the £50,270 threshold: £1,270 taxed at 20% (£254) and £7,130 at 40% (£2,852), giving £3,106 before the same £840 credit, leaving about £2,266. Identical flat, very different bill, purely because of the income she sits on.

2026/27 income tax rates and thresholds

Your rental profit is taxed at these rates once it's stacked on your other income (England, Wales and Northern Ireland):

The Personal Allowance is reduced by £1 for every £2 of income over £100,000, disappearing entirely at £125,140 - so a high earner's rental profit can be taxed at an effective rate above 45% in that band. Figures are from gov.uk income tax rates and HMRC's guidance on paying tax when you rent out a property, checked for 2026/27.

Scotland is different

If you live in Scotland, your rental profit is taxed at the Scottish income tax rates and bands, which have more bands and different thresholds than the rest of the UK. The £12,570 Personal Allowance is UK-wide, but the rates above it are set by the Scottish Parliament. A Scottish higher-rate taxpayer pays 42% (rather than 40%) on the slice of rental profit in that band, so check the figures with our Scotland tax calculator if you're a Scottish taxpayer.

Do you pay National Insurance on rental income?

For most landlords, no. Simply receiving rent on a property you own is treated as investment income, not earnings, so it isn't liable to National Insurance. The exception is if your letting activity is run as a genuine business at scale, with substantial time and effort, where HMRC may treat it as a trade. The vast majority of private landlords with one or a few properties don't pay NI on the rent. If you also run a separate self-employed business, that's where Class 4 NI applies, and our self-employed tax calculator covers it.

Reducing your rental tax bill

There are legitimate ways to keep more of your rent:

• Claim everything you're entitled to. Landlords routinely forget agent fees, insurance, ground rent, accountancy costs and the cost of replacing furnishings. Keep every receipt.
• Use Replacement of Domestic Items relief. Swapping a broken-down washing machine or a threadbare carpet for a like-for-like replacement is deductible, even though the original fit-out wasn't.
• Consider joint ownership. Property owned with a spouse or civil partner can be split so more profit falls in the lower earner's bands. The default split for married couples is 50/50 unless you formally elect otherwise (Form 17), so get advice before assuming an uneven split.
• Mind the higher-rate threshold. If your rental profit is about to tip you into 40% tax, a pension contribution that extends your basic-rate band can pull some of it back into 20% territory.

Common mistakes landlords make

• Deducting mortgage interest as an expense. The single most common error. Capital repayments were never deductible, and interest is now a 20% credit, not a deduction. Treating the full interest as an expense overstates your costs and understates your tax.
• Confusing repairs with improvements. A new kitchen of similar quality is a repair; a bigger, upgraded kitchen is an improvement and isn't deductible from rental profit.
• Ignoring rent received but not banked. On the cash basis, rent you've received counts even if a tenant pays late into the next period or you've not transferred it from the agent.
• Missing the Self Assessment deadline. Rental income over the property allowance generally has to go on a tax return (SA100 plus the property pages). The online filing and payment deadline is 31 January after the tax year ends, and late returns trigger an automatic £100 penalty. Use our Self Assessment tax calculator to see your full bill, and the income tax calculator to model how the rental slice changes your overall position.
• Forgetting that buying and selling are separate taxes. Stamp duty when you buy a second property, and capital gains tax when you sell, are different taxes entirely from income tax on the rent.

This rental income tax calculator and the figures here are estimates for general guidance only and not personal tax or financial advice. For a binding answer on your own circumstances, speak to an accountant or HMRC.

Who should use this calculator

For landlords working out the tax on rental profit. Property income is added to your other income and taxed at your marginal rate — but the calculation of profit itself changed fundamentally under Section 24, and that is the thing most landlords still get wrong.

Mortgage interest is no longer deductible from rental income. Instead you get a 20% tax credit against the final bill. For a higher-rate taxpayer that is a substantial loss of relief, and because the full rent now counts as income it can push landlords into a higher band — occasionally producing tax on a property that is losing money.

What this calculator assumes

• Rental profit is rent received less allowable expenses, excluding mortgage interest.
• Mortgage interest relief is given as a 20% tax credit, not a deduction.
• Profit is added to your other income and taxed at your marginal rate.
• The property allowance of £1,000 can be claimed instead of actual expenses where that is better.
• Rental profit is taxed at Scottish rates where Scotland is selected.

Limitations — what it does not cover

• The repairs versus improvements distinction. Repairs are deductible; improvements are capital and only relieved against CGT on sale.
• Replacement of Domestic Items relief, which replaced the old wear-and-tear allowance.
• Jointly owned property, where income is split by ownership share unless a Form 17 election is made.
• Furnished holiday lettings, which had their own regime.
• Rent a Room relief of £7,500 for letting in your own home.
• Losses, which carry forward against future rental profit only.

Related calculators

Map out the rest of your property tax picture with the second home stamp duty calculator for what you pay when buying, the capital gains tax on property calculator for when you sell, and the Section 24 landlord tax calculator to see how the mortgage interest restriction hits higher-rate landlords.

You might also need

• Tax Rebate Checker, check the property allowance and other landlord reliefs.

Related tools

• Rent a Room scheme calculator, compare the £7,500 tax-free scheme.