Landlord tax explained: what you pay on UK rental property in 2026/27

Five taxes touch a let residential property, and they arrive at different points in the life of the investment.

• Stamp duty on the way in. An additional-dwelling surcharge on top of the normal rate, paid within 14 days of completion.
• Income tax every year on your rental profit, at 20%, 40% or 45%, with mortgage interest relieved separately at the basic rate only.
• Capital gains tax on the way out, at 18% or 24% on residential property, reported and paid within 60 days of completion.
• Inheritance tax at 40% on the net value of the portfolio in your estate, with no business relief because letting counts as investment.
• Corporation tax and dividend tax instead of income tax if you hold through a limited company, at 19% to 25% on profits and then 10.75% to 39.35% on what you extract.

There is no single landlord tax rate to look up. What you pay is driven by your other income, how geared the property is, whose name it is in, and how long you hold it.

For the current bands and thresholds in table form, see our UK property tax rates reference.

You are taxed on profit, not rent. Add up the rent received across all your UK properties, deduct allowable expenses, and the balance is added to your other income and taxed at your marginal rate. All your UK residential lettings are pooled into one property business, so a loss on one flat reduces the profit on another.

For 2026/27 the rates that apply to that profit are:

Rental profit sits on top of your salary or self-employed income, so it is taxed at the highest rate you reach. If a salary of £45,000 leaves £5,270 of basic-rate band spare, the first £5,270 of rental profit is taxed at 20% and everything above it at 40%. Rental income also counts towards the £100,000 point where the personal allowance starts to taper away at £1 for every £2 of income, an effective 60% band that catches more landlords than expected.

National Insurance does not apply to ordinary rental income, because letting property is investment income rather than trading. That changes if the level of service you provide takes the activity into a trade, which is a live question for serviced accommodation.

If your gross rental income is £1,000 or less, the property allowance covers it and there is nothing to report. Above that you choose between the £1,000 allowance and your actual expenses, and you cannot claim both.

Section 24 removed mortgage interest from the list of deductible expenses for individual landlords. You now declare the profit before finance costs, then receive a tax reducer worth 20% of the interest for 2026/27, rising to 22% from 6 April 2027. The reducer is capped at the lower of your finance costs, your property profits, and your total income above the personal allowance.

For a basic-rate taxpayer, 20% relief against 20% tax is roughly neutral. Two things still bite. The declared profit is higher than the cash you receive, which can push you into the higher-rate band, trigger the High Income Child Benefit Charge from £60,000, or start the personal allowance taper. For anyone already at 40% or 45%, the shortfall is real: tax at 40% on income that only attracts 20% relief.

The restriction covers mortgage interest, interest on loans to buy furnishings, overdrafts and arrangement or broker fees. It does not apply to companies, to furnished holiday lets before the regime ended, or to commercial property. The 2027 rise to 22% is the first movement in the reducer since the phase-in completed, but it does not soften the gap: it happens because property income itself moves to 22%, 42% and 47% on the same day, so the shortfall for a higher-rate landlord stays 20 percentage points (42 less 22) and 25 points (47 less 22) for an additional-rate landlord. A basic-rate landlord sees no new wedge, since 22% relief matches 22% tax.

Take a landlord with a £45,000 salary and one let flat in 2026/27. Rent is £24,000, running costs are £4,000 and mortgage interest is £9,000.

The cash left after the mortgage is £11,000, so £5,146 of tax is an effective rate of about 47% on money actually received, against a headline higher rate of 40%. That gap is Section 24 in one number.

Run the same figures under the 2027/28 rules and the answer moves the wrong way. The £20,000 of property profit is taxed at the separate property rates: £5,270 of it falls in the basic band at 22% (£1,159) and the remaining £14,730 at 42% (£6,187), so £7,346 before relief. The reducer rises to 22% of £9,000, or £1,980, leaving £5,366 attributable to the property against £5,146 for 2026/27. On the same £11,000 of cash that is an effective rate near 49%. The extra 2% of relief is worth £180; the extra 2% on the property income costs £400.

Push the mortgage interest to £15,000 and the picture turns: profit before finance costs is still £20,000, cash retained falls to £5,000, and the tax bill barely moves. That is the point at which gearing, ownership structure and pension contributions stop being optional considerations.

Anything incurred wholly and exclusively for the letting business is deductible. The usual claims are letting agent and management fees, landlord insurance, ground rent and service charges, gas safety and EICR certificates, accountancy fees, advertising for tenants, legal fees on short leases, and council tax, utilities and cleaning during void periods.

Travel to inspect or maintain a property is allowable at 55p per mile for the first 10,000 business miles from 6 April 2026, then 25p. Replacement of domestic items relief covers like-for-like replacement of furniture, appliances and soft furnishings in a let residential property, though not the initial purchase.

The dividing line that causes most enquiries is repair versus improvement. Restoring something to its original condition is a repair and deductible now. Making it better than it was is capital, disallowed against rental income, but added to the base cost and relieved against capital gains tax on eventual sale. Replacing a worn kitchen with a comparable one is generally a repair; extending it is not.

Losses in a property business cannot be set against your salary. They carry forward against future profits of the same business indefinitely, which is worth tracking properly, because forgotten losses are the most common piece of free relief left unclaimed.

Stamp duty, and more of it than an owner-occupier. In England and Northern Ireland an additional dwelling attracts a 5% surcharge on the whole purchase price on top of the standard SDLT bands, payable within 14 days of completion. Scotland applies an 8% Additional Dwelling Supplement to LBTT and Wales has a separate higher-rates LTT table.

Companies pay the surcharge from the first pound, with no zero band. A company buying a single residential dwelling for more than £500,000 can also fall into the 17% flat charge unless a relief applies, and property rental business relief usually does apply to a genuine letting business. The relief is claimed, not automatic, and it can be withdrawn if the property is later occupied by a connected person.

Mixed-use and multiple-dwellings positions are worth checking before exchange rather than after. A purchase that includes commercial elements is taxed under the non-residential table, which is frequently cheaper, and it is far easier to get right at the outset than to reclaim later.

Capital gains tax on the increase in value, not the sale price. Deduct the original purchase price, stamp duty and legal fees on acquisition, capital improvements, and selling costs. The remaining gain is reduced by the £3,000 annual exempt amount and taxed at 18% within your unused basic-rate band and 24% above it for residential property.

The deadline catches people out: a UK residential disposal must be reported and the tax paid within 60 days of completion, through a separate CGT on UK property account, with the gain also going on your tax return afterwards. Late filing attracts penalties even where the tax has been paid.

If the property was ever your main home, private residence relief covers the period of occupation plus the final nine months of ownership, and lettings relief may apply where you shared occupancy with a tenant. Transfers between spouses and civil partners happen at no gain no loss, which is the simplest way to use two annual exempt amounts and two basic-rate bands on a sale, provided the transfer is made and documented before contracts are exchanged.

Rental property counts in full in your estate at market value less the outstanding mortgage, and anything above the available nil-rate bands is taxed at 40%. The nil-rate band, residence nil-rate band and the £2m taper threshold are all frozen until 5 April 2031, so rising property values push more estates over the line every year.

Do not count on business relief. Letting residential property is treated as holding investments rather than trading, so the combined £2.5m 100% relief allowance introduced from April 2026 does nothing for a standard buy-to-let portfolio. Furnished holiday lets rarely qualify either without a genuinely exceptional level of service.

The residence nil-rate band applies to a home you actually lived in that passes to direct descendants, not to rental property, and it tapers away once the estate exceeds £2m. A portfolio can therefore cost you relief on your own home as well as attracting tax in its own right. Planning here is slow-moving and structural, which is exactly why it needs to start early.

Two changes matter more than the rest: Making Tax Digital arriving for landlords, and property income getting its own tax rates from 6 April 2027, which is also why the Section 24 reducer moves for the first time in years.

Making Tax Digital for Income Tax applies from April 2026 where combined self-employment and property income exceeds £50,000, and from April 2027 above £30,000. The threshold looks at gross income, not profit, so a portfolio with thin margins can be caught while producing very little taxable income. Quarterly updates and digital records replace the single annual return, and spreadsheets only work if bridged by compatible software. Our Making Tax Digital for landlords guide sets out who is in scope and when.

Capital allowances also moved: the main-pool writing down allowance fell from 18% to 14%, the special rate pool stays at 6%, and a new 40% first-year allowance applies to qualifying main-pool expenditure. These matter for commercial property and communal plant rather than for the fabric of a standard residential let.

A company deducts mortgage interest in full and pays corporation tax at 19% up to £50,000 of profit, 25% from £250,000, with marginal relief between. On the worked example above, a company would pay 19% on £11,000, roughly £2,090, against £5,146 personally. That comparison is what drives most incorporation enquiries.

It is not the whole picture. Extracting the money costs dividend tax at 10.75%, 35.75% or 39.35% from 6 April 2026 above a £500 allowance, so the advantage largely disappears if you need every pound of the profit to live on. Moving existing property into a company is a disposal at market value: CGT on the gain and SDLT with the surcharge on the same day, unless incorporation relief or partnership treatment applies. Buy-to-let lending to companies is also priced higher.

The rough rule: companies suit geared higher-rate landlords who are building a portfolio and can leave profit in the business. Personal ownership suits lower gearing, basic-rate taxpayers, and anyone who needs the income now or expects to sell within a few years. For how incorporation activity has actually moved since Section 24, see our landlord tax index research.

Register for Self Assessment by 5 October following the tax year in which you first had rental income. The online return and any balancing payment are due by 31 January, with payments on account on 31 January and 31 July where the previous bill exceeded £1,000. A property sale has its own 60-day clock that runs regardless of where you are in the tax year.

Miss 31 January and a £100 penalty applies immediately, even if no tax is owed. Three months late adds £10 a day for up to 90 days, then further penalties at six and twelve months based on the tax outstanding, with late-payment penalties and interest running alongside. If you have unreported rental income from earlier years, the Let Property Campaign remains the cheapest route to put it right, with materially lower penalties than waiting for an enquiry.

A single flat, one mortgage, a PAYE job and nothing unusual is a return you can file yourself. The decisions that repay a specialist several times over are the structural ones: whether to incorporate, how to split ownership between spouses, when to sell and across which tax years, how to treat a refinance, whether a refurbishment is repair or capital, and how the portfolio is going to pass on.

A generalist accountant files what you give them accurately. The property-specific work is knowing that a declaration of trust needed a Form 17 to follow it, that a mixed-use purchase was taxed on the wrong table, that a loss from three years ago is still available, or that a disposal should have straddled two tax years. Those points are worth more than the compliance fee, and they are only visible to someone who looks at rental portfolios every week.

What that costs depends on the size of the portfolio and how much of it is structuring rather than filing. It is a conversation, not a price list, and the first one is free. Our landlord accounting service covers the ongoing compliance side of that.