How Rental Income is Taxed

Rental income is added on top of your employment income. You're taxed at your marginal rate — 20%, 40%, or 45% depending on your total income. You can deduct allowable expenses like repairs, insurance, and letting agent fees.

Mortgage Interest Relief

Mortgage interest is no longer a deductible expense. Instead, you receive a 20% tax credit on mortgage interest payments. This means higher rate taxpayers pay more tax on rental income than they did before the 2020 changes.

Property Allowance

If your total rental income is under £1,000, it's tax-free under the property allowance. Use our salary calculator to check your overall tax position.

What This Calculator Does

This calculator shows how much tax you'll pay on rental income in 2025/26, factoring in allowable expenses, the property allowance, and mortgage interest relief. It is designed for landlords and property investors calculating tax on their rental income.

How the Calculation Works

Rental profits (income minus allowable expenses) are added to your other income and taxed at your marginal rate. Mortgage interest relief is given as a 20% tax credit rather than a deduction. The £1,000 property allowance covers small amounts.

Common Scenarios

A higher-rate taxpayer with £12,000 rental income and £4,000 mortgage interest would pay roughly £2,800 in tax on the rental profit. The Section 24 mortgage interest changes mean highly leveraged landlords pay significantly more tax than before.

Related Calculators

You might also find these useful: Capital Gains Tax, Mortgage, Stamp Duty. Or use our main salary calculator for a complete take-home pay breakdown.