Tax on Rental Income Calculator
Rent of £18,000 with £6,000 of mortgage interest leaves a higher-rate landlord £4,200. This rental income tax calculator works out the tax on the profit, the credit the interest earns back, and the cash you keep.
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Tax on Rental Income Calculator
Rent of £18,000 with £6,000 of mortgage interest leaves a higher-rate landlord £4,200. This rental income tax calculator works out the tax on the profit, the credit the interest earns back, and the cash you keep.
Repairs, letting fees, insurance, ground rent etc. Do not include mortgage interest here.
Your mortgage interest is not taken off the profit. You get a credit worth 20% of it instead, rising to 22% for 2027/28, when property income in England, Wales and Northern Ireland is taxed at 22%, 42% and 47% instead of 20%, 40% and 45%. This tool answers 2026/27. The whole profit is taxed at the one band you picked, so a profit that straddles two bands lands between the two answers. The credit cannot be worth more than 20% of your rental profit either, so a very large mortgage can leave part of it unused and carried forward. Companies are taxed differently, and this is an estimate rather than a filed return.
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This interactive tool is built for a larger screen. On a phone, the quickest route is to send us your numbers and have a specialist come back with the figure and the next sensible step.
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Start with the rent, take off what it costs you to run the let, and what is left is your rental profit. That profit sits on top of your other income and is taxed at your top rate. The calculator's own default figures show the whole sum. Rent of £18,000 less £3,000 of running costs leaves a profit of £15,000. At the 40% higher rate that is £6,000 of tax. You then get a credit worth 20% of your £6,000 of mortgage interest, which is £1,200, so the bill falls to £4,800. Take the interest and the tax off the profit and you keep £4,200.
The mortgage step is the part that catches landlords out. You cannot take the interest off the rent as a running cost. Section 24 swapped that for a credit worth 20% of the interest, whatever rate you pay. If you pay tax at 20%, the credit gives back exactly what the old deduction did. If you pay 40% or 45%, you are taxed on money you never see, because the interest still leaves your account in full.
The costs you can claim are the ones that keep the let running: repairs, letting agent and management fees, insurance, ground rent, service charges and accountancy. Making the property better than it was is a different thing. Replacing a tired kitchen with a similar one is a repair and comes off your rent now. Adding an extension is capital, so it waits and cuts your gain when you sell. Rent of £1,000 a year or less is usually covered by the £1,000 property allowance, with nothing to report at all. You cannot mix that allowance with the interest credit though, so it is one or the other.
Know where this answer is soft. It taxes your whole profit at the single band you choose, so a profit that pushes you from one band into the next really sits between the two figures. And it prices you as an individual, because a company pays corporation tax on its profit and still takes its interest off in full. Wondering whether the company route would leave you better off? That turns on how long you plan to hold, how much you owe and how much you draw out. Send us your figures and we will run both sides.
Worked examples
How the numbers come out
A basic-rate landlord with one let flat
Annual rental income £12,000, running costs £2,400, mortgage interest £4,200, basic rate band
- Rental profit = £12,000 of rent less £2,400 of running costs = £9,600
- Tax before the credit = £9,600 x 20% = £1,920
- Mortgage interest credit = 20% of £4,200 = £840
- Tax to pay = £1,920 - £840 = £1,080
- Take-home = £9,600 less £4,200 of interest less £1,080 of tax = £4,320
- At the basic rate the credit hands back exactly what taking the interest off would have, so the mortgage rule costs you nothing here
A higher-rate landlord with a large mortgage
Annual rental income £24,000, running costs £4,000, mortgage interest £14,000, higher rate band
- Rental profit = £24,000 less £4,000 = £20,000
- Tax before the credit = £20,000 x 40% = £8,000
- Mortgage interest credit = 20% of £14,000 = £2,800
- Tax to pay = £8,000 - £2,800 = £5,200
- Cash left before tax = £20,000 of profit less £14,000 of interest = £6,000
- Take-home = £6,000 less £5,200 of tax = £800, so the tax takes roughly 87% of the cash
- Had the interest come off before tax, the bill would have been £2,400, so the credit rule costs this landlord £2,800 a year
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