Landlord tax return guide: what to report and how rental profit is taxed

Usually, yes. Rent is untaxed income, so HMRC expects you to report it through a landlord tax return, which is the property pages of your Self Assessment return. This applies whether you let one flat or a portfolio, and whether or not you also have a job.

There is one main exception. If your total rental income for the year is £1,000 or less, the property allowance (a tax-free amount for small property income) covers it and you do not need to report it. Our guide to the property income allowance explains how that works.

If you have not filed before, you must register for Self Assessment by 5 October after the end of the first tax year you had the income. For rent you first received in 2025/26, that deadline was 5 October 2026. If you missed it, register as soon as you can. If you are unsure whether you need a return at all, read do I need to do a Self Assessment.

Joint owners. If you own a property with someone else, each owner reports their own share of the rent and expenses on their own tax return. Normally the share follows the share of ownership. Each owner claims the Section 24 credit (explained below) on their own share of the finance costs.

Married couples and civil partners who own property jointly are usually taxed 50:50, whatever the actual ownership split. If you genuinely own unequal shares, you can ask HMRC to tax you on the real split by sending a declaration (Form 17). Splitting income this way can matter where one partner pays a lower rate of tax, so it is worth checking before you buy or transfer a share.

Your taxable rental profit is the rent you are entitled to for the tax year (6 April to 5 April) minus allowable expenses. You add together all your UK residential lets and treat them as one property business, so a loss on one property is set against the profit on another.

1. 1

   Add up your rent

   Include all rent for the tax year across every property, plus any other charges the tenant pays you, such as for services you provide.

2. 2

   Take off allowable expenses

   Deduct the day-to-day running costs listed in the table below. Do not deduct mortgage interest here.

3. 3

   Work out the tax on the profit

   The profit is added to your other income, such as a salary, and taxed at your income tax rates: 20% basic, 40% higher and 45% additional.

4. 4

   Take off the mortgage interest credit

   Reduce your tax bill by 20% of your mortgage interest and other finance costs. This is the Section 24 credit explained below.

Scotland has different income tax bands for this kind of income, so if you live in Scotland the rates in this guide will not match your bill exactly.

An allowable expense is a cost you pay wholly and only for running the letting business. The common ones are:

This is the question we are asked most by landlords. A repair puts something back to how it was, using reasonably equivalent materials. An improvement makes the property better than it was, or adds something new. Repairs are deducted from rent. Improvements are capital costs: they are not deducted from rent, but they can reduce your capital gains tax when you sell.

Replacing an old item with the modern equivalent, such as single glazing with double glazing, is usually still treated as a repair. Large jobs can mix both, in which case the cost is split. If you are planning major work, ask before you start so you know how it will be treated.

Under Section 24, individual landlords with residential lets cannot deduct mortgage interest and other finance costs from their rent. Instead, they get a tax credit worth 20% of those costs. Basic rate taxpayers end up roughly where they were before. Higher and additional rate taxpayers pay more, because their profit is taxed at 40% or 45% but the credit is only 20%. Limited companies are not affected by Section 24.

Say you let a flat for £15,000 a year. Your allowable expenses are £3,000 and your mortgage interest is £6,000. You have a salary that already puts you in the higher rate band, so all the rental profit is taxed at 40%.

Before Section 24, the £6,000 of interest would have been deducted from rent, leaving a profit of £6,000 and tax of £2,400 at 40%. So this landlord pays £1,200 more than under the old rules. Had the same landlord been a basic rate taxpayer throughout, the tax would be £12,000 x 20% = £2,400, minus the £1,200 credit, which is £1,200: the same as the old rules.

Separate property income tax rates of 22%, 42% and 47% were announced at Autumn Budget 2025 for April 2027. They do not affect the 2026/27 tax year.

Payments on account are advance payments towards next year’s bill, each usually half of last year’s. You do not need to make them if last year’s bill was under £1,000, or if more than 80% of your tax was already paid at source, for example through PAYE. Missing the deadline brings a £100 penalty straight away, rising over time. See our guides to the Self Assessment deadline and penalties and appeals.

Making Tax Digital for Income Tax is also arriving for landlords. It means keeping digital records and sending quarterly updates to HMRC, then a final return by 31 January. It depends on your qualifying income, which is your gross rent plus any self-employed turnover before expenses. It applies from 6 April 2026 if that is over £50,000, from 6 April 2027 if over £30,000, and from 6 April 2028 if over £20,000. Our guide to Making Tax Digital for landlords covers what to do.

Usually, yes. Capital gains tax (CGT) is tax on the gain you make when you sell something for more than you paid. For a rental property, the gain is the sale price minus the purchase price, buying and selling costs, and the cost of improvements.

• The first £3,000 of gains in the tax year is tax free (the annual exempt amount).
• Gains within your basic rate band are taxed at 18%; gains above it at 24%.
• For UK residential property, you must report the sale and pay the CGT within 60 days of completion, separately from your normal tax return.

We prepare landlord tax returns for clients across the UK, online or at our Liverpool office by appointment. We work out your rental profit, check which costs are repairs and which are improvements, apply the Section 24 credit correctly and file on time. You speak to the person doing the work, and every return is overseen by an ICAEW Chartered Accountant.

• Send us your rent statements, bills and mortgage interest figures, or give us access to your software or spreadsheet.
• We prepare the return, explain the bill and tell you about payments on account.
• We remind you about deadlines and help you get ready for Making Tax Digital.

Our fixed monthly fees for landlords start from £99, and you get an exact price in writing within one working day after a free 20-minute chat. See our landlord accounting service or book your free chat.