For landlords · 6 min read
Landlord tax in the UK: an orientation, not advice
Rental profit is taxable and must be declared. Profit is rental income less allowable expenses, and it is taxed at your marginal rate. Since the finance-cost restriction was fully phased in, individual landlords no longer deduct mortgage interest as an expense and instead receive a basic-rate tax credit of 20%. There is a £1,000 property allowance for very small amounts of income. This is an orientation to the concepts only — tax depends entirely on your circumstances, and you should use a qualified accountant.
Frequently asked questions
Do I pay tax on rental income?
Yes. You pay tax on rental profit — income less allowable expenses — added to your other income and taxed at your marginal rate. It is declared through Self Assessment.
Can I deduct mortgage interest from rental income?
Individual landlords can no longer deduct mortgage interest as an expense. Instead you receive a tax credit worth 20% of the interest. This particularly affects higher-rate taxpayers, because profit is now calculated before interest.
What expenses can a landlord claim?
Costs incurred wholly and exclusively for the letting: agent fees, repairs and maintenance, landlord insurance, ground rent and service charges, utilities and council tax where you pay them, accountancy and safety certificates. Improvements are capital and not deductible against rental income.
What is the £1,000 property allowance?
A tax-free allowance for property income. Below £1,000 you generally need not declare it, and above it you can elect to deduct the £1,000 allowance instead of actual expenses where that produces a better result.
Is it better to own rental property through a company?
It depends entirely on your income, portfolio size, financing and long-term plans, and the trade-offs change with each Budget. This is a question for a qualified accountant rather than a general guide.