Landlord Tax Calculator — Calculate Tax on Rental Property Income — UK 2026
Calculate income tax on your UK rental income including mortgage interest relief restrictions and allowable expenses for 2026-27.
UK landlords pay income tax on rental profits at their marginal rate (20% 40% or 45%). Since April 2020 mortgage interest is no longer deductible as an expense but instead receives a 20% tax credit. This change significantly increased the tax burden for higher-rate taxpayer landlords. Allowable deductions include letting agent fees insurance repairs (not improvements) ground rent and service charges.
How much tax do I pay on £20000 rental income?
If your total income (salary + rent) puts you in the 40% bracket: £20000 rental income minus £5000 expenses = £15000 profit taxed at 40% = £6000 tax. Plus if you have £8000 mortgage interest you get a 20% tax credit = £1600 relief. Net tax on rental: £4400. A basic rate taxpayer would pay £3000 on the same rental income minus the same £1600 credit = £1400 net.
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Landlord Tax Calculator
How Tax Calculation Works
Income tax is calculated on your total taxable income after deducting eligible exemptions and deductions from your gross income. The tax is applied progressively — you pay a lower rate on initial income slabs and higher rates only on income that exceeds each threshold. This means moving into a "higher tax bracket" does not mean your entire income is taxed at the higher rate. Understanding marginal vs effective tax rate is crucial: your marginal rate applies only to the last rupee earned, while your effective rate is the average across all slabs.
Tax-Saving Strategies
Under the old regime, maximize deductions: Section 80C allows up to Rs 1.5 lakh through PPF, ELSS, EPF, and life insurance. Section 80D covers health insurance premiums up to Rs 25,000 (Rs 50,000 for senior citizens). Section 80CCD(1B) offers an additional Rs 50,000 deduction for NPS contributions. Home loan interest up to Rs 2 lakh is deductible under Section 24. Under the new regime, the Rs 75,000 standard deduction and lower slab rates may save you more if your total deductions are below Rs 3.75 lakh. Calculate under both regimes before choosing.
Key Information
| Parameter | Details |
|---|---|
| Tax Rate on Rental Income | Your marginal rate (20%/40%/45%) |
| Mortgage Interest Relief | 20% tax credit only |
| Property Allowance | £1000 (instead of deducting expenses) |
| Capital Gains Tax on Sale | 18% or 24% |
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Use Calculator NowFrequently Asked Questions
How much tax do I pay on £20000 rental income?
If your total income (salary + rent) puts you in the 40% bracket: £20000 rental income minus £5000 expenses = £15000 profit taxed at 40% = £6000 tax. Plus if you have £8000 mortgage interest you get a 20% tax credit = £1600 relief. Net tax on rental: £4400. A basic rate taxpayer would pay £3000 on the same rental income minus the same £1600 credit = £1400 net.
Should I put my rental property in a limited company?
For new purchases higher-rate taxpayers benefit from a company structure: corporation tax is 25% versus 40% personal tax and full mortgage interest is deductible. However transferring existing property to a company triggers stamp duty and capital gains tax making it impractical for most existing landlords. For new investments the company route is increasingly popular especially for portfolio landlords.
What expenses can I deduct as a landlord?
Deductible: letting agent fees (10-15% of rent) buildings insurance landlord liability insurance repairs and maintenance (not improvements) ground rent and service charges council tax (if you pay it) utilities (if included in rent) advertising costs accountancy fees landlord certificates (gas electrical EPC). Not deductible: mortgage capital repayments property improvements personal expenses or your own time managing the property.
What are the UK income tax bands for 2025-26?
Personal Allowance: £0-£12,570 (0%). Basic rate: £12,571-£50,270 (20%). Higher rate: £50,271-£125,140 (40%). Additional rate: over £125,140 (45%). The personal allowance reduces by £1 for every £2 earned over £100,000, creating an effective 60% rate between £100,000-£125,140.
What is the £100,000 tax trap?
When your income exceeds £100,000, you lose £1 of personal allowance for every £2 over. This creates a hidden 60% effective tax rate between £100,000-£125,140. Pension contributions are the most effective way to bring your income below this threshold and reclaim the allowance.
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Last updated: March 2026