How much tax will you pay on your rental income?
Enter your rent, your costs and your mortgage interest, and see the tax on your rental profit with the 20% finance cost relief worked out the way HMRC does it. For 2025-26, and for 2026-27, the first year of Making Tax Digital for Income Tax.
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Based on the gov.uk rules
How rental income is taxed
You pay Income Tax on your rental profit: the rent you received less your allowable costs, such as repairs, letting agent fees, insurance and ground rent. That profit is added to your other income and taxed at 20%, 40% or 45% once the total passes your £12,570 Personal Allowance. There is no National Insurance on rent.
Mortgage interest on a residential let is the cost most landlords get wrong. It is not taken off your rent. Instead, your tax bill is reduced by 20% of the interest, the basic rate, whatever rate you pay. A higher rate taxpayer therefore pays more on a mortgaged let than the profit alone suggests.
The reduction is limited to 20% of the lowest of three figures: your finance costs, your property profit, and your income above the Personal Allowance. It cannot create a refund, and anything it cannot use this year is carried forward to the next.
What the 20% relief does
Rent and costs
Rent of £52,000, mortgage interest of £20,000 and other costs of £9,000. The profit is £43,000, because the interest is not taken off.
Tax on the profit
With no other income, the tax on £43,000 in 2025-26 is £6,086.
The relief
20% of the £20,000 interest, £4,000, comes off the tax.
The bill
£2,086 to pay. This is gov.uk's own example, worked on 2025-26 rates.
What this estimate leaves out
Scottish Income Tax
It uses the rates for England, Wales and Northern Ireland. Scottish taxpayers pay different Income Tax rates and bands.
Earlier years
Losses and unused finance costs brought forward from earlier years would lower the bill and are not included.
Joint ownership
Enter your own share of the rent and costs. Property owned with a spouse or civil partner is usually taxed in equal shares.
Foreign tax and other income
Tax paid abroad on overseas rent, savings, dividends and self-employment income all change the answer and are not included.
Filing it under Making Tax Digital? See MTD for landlords.
Straight answers
Can I deduct mortgage interest from my rental income?
Not on a residential let. Since April 2020 mortgage interest is not taken off your rent. Instead you get a tax reduction of 20% of the interest, the basic rate, whatever rate of tax you pay. That is why a higher rate landlord pays more than the profit alone suggests.
How is the finance cost relief limited?
The reduction is 20% of the lowest of three figures: your finance costs, your property profit, and your income above the Personal Allowance. It cannot turn into a refund, and any finance costs it cannot use this year are carried forward to the next.
Do landlords pay National Insurance on rent?
Usually not. Rental income is not trading income, so there is no Class 4 National Insurance on it. Only someone running a property business so actively that it counts as a trade would be different, and that is rare.
What costs can a landlord claim?
The costs of letting the property: repairs and maintenance, letting agent and management fees, insurance, ground rent and service charges, utilities and council tax you pay for tenants, and accountancy. Improvements, such as an extension or a higher specification kitchen, are not repairs and cannot be claimed against rent.
What is the property allowance?
A £1,000 allowance you can claim instead of your actual costs. It covers all your property income, UK and overseas together. If you use it you cannot claim your real costs or the finance cost relief, so it only helps when your costs are very small.
Is overseas rent taxed the same way?
Mostly. Overseas property is a separate business from your UK lets, with its own profit, but it is taxed at the same rates and mortgage interest on a residential let abroad gets the same 20% relief. Tax paid abroad can usually be credited against the UK bill, which this calculator does not do.
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