Landlord tax explained: what you pay on UK rental property in 2026/27
Rental profit is taxed at your normal income tax rate, but mortgage interest is not deductible, so a geared higher-rate landlord can pay close to half of the cash they keep. Every tax that touches a let property, what changes next April, and where the money actually goes.
Sound familiar?
There is no single landlord tax rate to look up
What you pay depends on your other income, how geared the property is, whose name it is in and how long you hold it. Six different taxes touch a let property, and they arrive at different points in the life of the investment.
If one of these is the sentence going round your head, the answer is a number, and you can have it.
Book a landlord tax reviewThe full picture
What tax do UK landlords pay?
Six taxes touch a let residential property, and they arrive at different points in the life of the investment.
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.
Stamp duty
An additional-dwelling surcharge on top of the normal rate, on every residential property you buy that is not your only home.
Paid within 14 days of completion
Income tax
Charged on your rental profit at 20%, 40% or 45%, with mortgage interest relieved separately at the basic rate only.
Every year, through Self Assessment
Capital gains tax
Charged at 18% or 24% on residential property, on the gain rather than the sale price.
Reported and paid within 60 days of completion
Inheritance tax
Charged at 40% on the net value of the portfolio in your estate, with no business relief because letting counts as investment.
On death, unless the structure changes first
Corporation tax and dividend tax
Replaces income tax if you hold through a limited company: 19% to 25% on profits, then 10.75% to 39.35% on what you extract.
Two charges instead of one, on company-held property
Annual tax on enveloped dwellings
An annual charge on company-held residential property worth over £500,000. Letting to unconnected tenants relieves it in full, but only if you claim.
A return every April, even when the relief reduces it to nil
Income tax
How is rental income taxed?
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:
| Band | Taxable income | Rate on rental profit |
|---|---|---|
| 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% |
Note: Example figures displayed
It stacks on top of your other income. Rental profit is taxed at the highest rate you reach, not at a rate of its own. A salary of £45,000 leaves £5,270 of basic-rate band spare, so the first £5,270 of rental profit is taxed at 20% and everything above it at 40%.
A £45,000 salary and £20,000 of rental profit, 2026/27.
- Your salary
Uses up the basic-rate band first - £45,000
- Rental profit taxed at 20%
What is left of the basic-rate band, up to £50,270 - £5,270
- Rental profit taxed at 40%
Everything above the higher-rate threshold - £14,730
Note: Example figures displayed
It counts towards the £100,000 taper. Above £100,000 the personal allowance is withdrawn at £1 for every £2 of income, an effective 60% band that catches more landlords than expected.
National Insurance does not apply. 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.
Under £1,000, there is nothing to report. The property allowance covers gross rental income up to that amount. Above it you choose between the £1,000 allowance and your actual expenses, and you cannot claim both.
Put your own numbers through the rental income tax calculator, and if you are filing for the first time, our guide to filing a landlord tax return walks through the return itself.
Section 24
What is Section 24 and how much mortgage interest relief do you get?
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.
How much mortgage interest relief you actually get depends on your band. The second figure in each cell is the 2027/28 rate, once property income moves to its own 22%, 42% and 47%.
| Your band | Tax on property income | Section 24 relief | The gap |
|---|---|---|---|
| Basic rate | 20%, then 22% | 20%, then 22% | No gap |
| Higher rate | 40%, then 42% | 20%, then 22% | 20 points |
| Additional rate | 45%, then 47% | 20%, then 22% | 25 points |
Note: Example figures displayed
The 2027 rise to 22% is the first movement in the reducer since the phase-in completed, and it changes nothing: it happens because property income moves on the same day, so a higher-rate landlord keeps a 20 point shortfall and an additional-rate landlord keeps 25.
A basic-rate taxpayer looks safe in that table and often is not. The declared profit is higher than the cash you receive, so it can push you into the higher-rate band, trigger the High Income Child Benefit Charge from £60,000, or start the personal allowance taper.
The restriction covers
- Mortgage interest
- Interest on loans to buy furnishings
- Overdraft interest
- Arrangement and broker fees
It does not apply to
- Limited companies
- Commercial property
- Furnished holiday lets, before the regime ended
Worked example
How much landlord tax do I pay?
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.
| Rent received | £24,000 |
| Less allowable expenses | (£4,000) |
| Taxable property profit (before finance costs) | £20,000 |
| Total taxable income with salary | £52,430 |
| Income tax before the reducer | £13,432 |
| Section 24 reducer (20% of £9,000) | (£1,800) |
| Income tax due | £11,632 |
| Tax attributable to the property | £5,146 |
Note: Example figures displayed
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.
What that is as a rate on money actually received
- The headline rate you think you are paying40%
Higher-rate income tax.
- 2026/27, on the cash you actually receivedabout 47%
£5,146 of tax on £11,000 left after the mortgage.
- 2027/28, same figures, new property ratesnear 49%
£5,366 on the same £11,000. 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 cash retained falls to £5,000 while the tax bill barely moves. That is the point where gearing, ownership structure and pension contributions stop being optional considerations.
Note: Example figures displayed
Want to know your own effective rate?
Book a landlord tax reviewDeductions
Which expenses can landlords deduct?
Anything incurred wholly and exclusively for the letting business is deductible. The usual claims:
- 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
- Council tax, utilities and cleaning during void periods
- Travel to the property, at 55p per mile for the first 10,000 business miles from 6 April 2026, then 25p
- Replacement of domestic items relief on like-for-like furniture, appliances and soft furnishings, but not the initial purchase
The safety and licensing side has its own cycle, cost and capital versus revenue split, set out in our landlord compliance guide, and the full list of landlord tax deductions goes further than the summary above.
The dividing line that causes most enquiries is repair versus improvement. Both are money spent on the property. Only one of them comes off this year's rent.
Repair
Restoring something to the condition it was already in, like replacing a worn kitchen with a comparable one.
Deductible now, against this year's rental income
Improvement
Making something better than it was, like extending that kitchen.
Capital: added to the base cost and relieved against capital gains tax when you sell
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.
Cannot go here
Against your salary
A loss in a property business cannot reduce employment income, however large it is and whatever else happened that year.
Goes here, indefinitely
Forward, against future profits of the same business
There is no time limit, which is exactly why it gets forgotten. Track it and it is free relief; lose the record and it is gone.
Buying
What tax do you pay when you buy a rental property?
Stamp duty, and more of it than an owner-occupier pays. What an additional dwelling costs depends on where you are buying.
England and Northern Ireland
5%
Surcharge on the whole purchase price, on top of the standard SDLT bands
Scotland
8%
Additional Dwelling Supplement, charged on top of LBTT
Wales
Higher rates
A separate higher-rates LTT table rather than a flat surcharge
Note: Example figures displayed
It is payable within 14 days of completion in England and Northern Ireland, and it is charged on the whole price, not just the slice above a threshold.
Companies pay it 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 are worth checking before exchange, not 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.
Exchange
The last moment to fix the structure
Mixed-use and multiple dwellings are worth checking before exchange, not after. A purchase with 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.
Completion
The charge crystallises
Charged on the whole price, not just the slice above a threshold. A company pays from the first pound, with no zero band.
14 days later
Filed and paid, in England and Northern Ireland
A fortnight, not a tax year. It is the shortest deadline a landlord meets anywhere in the system.
Selling
What tax do you pay when you sell?
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.
From completion, not from the tax year end
A UK property disposal return is due within 60 days of completion where capital gains tax is due on the disposal, and the tax is payable on the same date.
Where the gain is fully covered by private residence relief, losses or the annual exempt amount, no 60-day return is needed.
The charge on the gain
- 18%
- Residential gains within the basic rate band
- 24%
- Residential gains above it
- £3,000
- Annual exempt amount
Note: Example figures displayed
It is reported separately, and quickly. Where capital gains tax is due, a UK residential disposal goes through a CGT on UK property account within 60 days of completion, with the gain also going on your tax return afterwards. Late filing attracts penalties even where the tax has been paid.
If it 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. That 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.
Inheritance tax
What happens to your portfolio for inheritance tax?
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 does not cover rental property
It applies to a home you actually lived in that passes to direct descendants, 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.
40%
On everything above the bands
Rental property counts in full, at market value less the outstanding mortgage.
£2m
The taper threshold
Frozen alongside the nil-rate band and the residence nil-rate band.
Frozen to
5 April 2031
No rate has to move for more estates to be caught. Rising values do it on their own, every year until then.
Note: Example figures displayed
What's changing
What changes for landlords in 2026/27 and 2027/28?
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.
| Item | 2026/27 | From 2027/28 |
|---|---|---|
| Rates on property income | 20% / 40% / 45%, taxed with other income | Separate property rates of 22% / 42% / 47% from 6 April 2027 (England, Wales and NI; Scotland sets its own) |
| Section 24 finance cost reducer | 20% basic-rate credit | 22% from 6 April 2027, tracking the new property basic rate |
| Making Tax Digital for Income Tax | Mandatory above £50,000 from April 2026 | Above £30,000 from April 2027, then above £20,000 from April 2028 |
| Writing down allowance (main pool) | 14%, reduced from 18% | 14%, with a 40% first-year allowance on qualifying main-pool spend |
| Dividend tax rates | 10.75% / 35.75% / 39.35% from 6 April 2026 | Unchanged |
| Mileage for property business travel | 55p per mile for the first 10,000 miles | Unchanged |
| Inheritance tax thresholds | Frozen | Frozen until 5 April 2031 |
Note: Example figures displayed
Making Tax Digital for Income Tax applies from April 2026 where combined self-employment and property income exceeds £50,000, from April 2027 above £30,000, and from April 2028 above £20,000. 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, and the MTD checker tells you which April catches you.
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.
The threshold does not sit still
From April 2026
£50,000
In force. Gross property and self-employment income.
From April 2027
£30,000
The step most landlords are caught by.
From April 2028
£20,000
The floor as it currently stands.
These do sit still
£1,000
Property allowance
Against gross rent, instead of actual costs.
£7,500
Rent-a-room relief
£3,750 where the income is shared.
Note: Example figures displayed
Structure
Should you hold rental property personally or in a company?
The tax on the profit is what drives most incorporation enquiries. It is not the whole picture, and the rest of the table is why.
| Personally | In a company | |
|---|---|---|
| Mortgage interest | Basic-rate reducer only, under Section 24 | Deducted in full |
| Tax on profit | Income tax at 20%, 40% or 45% | Corporation tax at 19% up to £50,000 of profit, 25% from £250,000 |
| On the worked example above | £5,146 | About £2,090 |
| Getting the cash out | It is already yours | Dividend tax at 10.75%, 35.75% or 39.35% from 6 April 2026, above a £500 allowance |
| Moving existing property in | Nothing to do | A disposal at market value: CGT on the gain and SDLT with the surcharge on the same day |
| Buy-to-let lending | Standard rates | Priced higher |
Note: Example figures displayed
Marginal relief applies between the two corporation tax rates, and moving property in can avoid the CGT charge where section 162 incorporation relief or partnership treatment applies. Neither is automatic, and section 162 relief in particular is no longer given by default: for transfers on or after 6 April 2026 it has to be claimed, by the first anniversary of the 31 January following the tax year of the transfer, and the old election to disapply it has been repealed. Stamp duty is charged either way.
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, and if this is your first year of letting, the first-time landlord tax guide starts further back.
A company tends to suit
- Higher-rate taxpayer
- Geared, with real mortgage interest
- Building the portfolio rather than living off it
- Able to leave profit in the business
Personal ownership tends to suit
- Basic-rate taxpayer
- Low or no gearing
- Needs the income now
- Expects to sell within a few years
Ticking the company column is not the decision. Moving existing property in is a disposal at market value, and section 162 incorporation relief is no longer automatic: for transfers on or after 6 April 2026 it has to be claimed.
Compliance
What are the deadlines and penalties?
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 it escalates
The day after 31 January
£100
Applies even if no tax is owed
Three months late
£10 a day
For up to 90 days, on top of the £100
Six months late
A further penalty
Based on the tax outstanding
Twelve months late
A further penalty
Based on the tax outstanding
Note: Example figures displayed
Late-payment penalties and interest run alongside all of this. 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.
Dates for the year are in our landlord tax calendar for 2026/27, and the escalation above is set out in full in HMRC penalties for late returns.
Getting help
When is a property specialist worth it?
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
- 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.
A generalist accountant
Files what you give them, accurately. Nothing here is a criticism: it is what the engagement is.
- Files the return
- Applies the figures you supply
- Meets the deadline
Someone who reads portfolios every week
Sees the things that are not on the paperwork you handed over, because they are absences rather than entries.
- 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
- That a disposal should have straddled two tax years
Testimonials
Landlords who have had this reviewed
Anonymised feedback from landlords and investors we have worked with on exactly these questions.
“They modelled our Section 24 position properly for the first time and showed us exactly where incorporation did and did not make sense. No hard sell, just the numbers.”
“We were weeks from missing the 60-day capital gains deadline on a sale. They turned the computation around and filed on time. Worth the fee on that alone.”
“Getting ready for Making Tax Digital felt overwhelming. They set up the software, mapped every property, and now the quarterly filing just happens.”
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Tell us what you own, how it is geared and whose name it is in. We will tell you what your effective rate actually is and what, if anything, is worth changing.
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