Rental income is added to your other income and taxed at your marginal rate. If your total income falls within the basic rate band, you pay 20%. Higher rate taxpayers pay 40%, and additional rate taxpayers pay 45%. You're taxed on your profit, not the total rent you receive. Profit is your rental income minus allowable expenses.

Section 24 changed how landlords can treat mortgage interest for tax purposes. Before April 2020, you could deduct mortgage interest from your rental income before calculating tax. Now you cannot. Instead, you receive a 20% tax credit on your mortgage interest. This makes no difference for basic rate taxpayers, but higher rate taxpayers now pay significantly more because their rental profit is taxed at 40% while the relief remains at 20%.

Allowable expenses include letting agent fees, buildings and contents insurance, maintenance and repairs, ground rent and service charges, council tax if you pay it, utility bills if you pay them, accountancy fees, legal fees for leases under a year, and costs of advertising for tenants. You cannot deduct mortgage capital repayments, the cost of improvements as opposed to repairs, or your own time spent managing the property.

Repairs restore something to its original condition and are tax deductible. Improvements upgrade or enhance the property beyond its original state and are not deductible against rental income. Replacing a broken boiler with a similar model is a repair. Replacing it with a significantly better system may be classed as an improvement. Improvements can be offset against capital gains tax when you sell the property.

Yes. If you receive rental income above £1,000 per year, you must register for self-assessment and file a tax return. You report your rental income and expenses on the property pages of the return. The deadline for online submissions is 31 January following the end of the tax year. Penalties apply for late filing and late payment.

If your total rental income is £1,000 or less per year, you don't need to declare it or pay tax on it. If your income exceeds £1,000, you can choose to deduct the £1,000 allowance instead of claiming actual expenses. This is only beneficial if your real expenses are less than £1,000. Most landlords with mortgages and regular costs are better off claiming actual expenses.

It can be. Limited companies pay corporation tax at 25% on profits, and mortgage interest remains fully deductible as a business expense. However, extracting money from the company through dividends or salary triggers additional personal tax. There are also setup costs, annual accounts filing, and potentially higher mortgage rates for company borrowers. The decision depends on your income level, plans to reinvest profits, and long-term goals. It's worth speaking to a tax adviser before restructuring.

Yes. When you sell a rental property for more than you paid, you owe capital gains tax on the profit. The rate is 18% for basic rate taxpayers and 24% for higher rate taxpayers. You can deduct buying and selling costs, plus the cost of improvements you made during ownership. Each person has an annual capital gains allowance, which is £3,000 for the 2024/25 tax year. Any gain above this is taxable.

All your rental income and expenses are combined into a single property business for tax purposes. You add up the total rent received across all properties, subtract the total allowable expenses, and pay tax on the overall profit. Losses from one property can offset profits from another. If your combined property business makes a loss, you can carry it forward to offset future rental profits.

You must keep records of all rental income received and expenses paid. This includes tenancy agreements, rent receipts, invoices, bank statements, mortgage statements, and receipts for repairs and maintenance. HMRC requires you to keep records for at least five years after the 31 January submission deadline for the relevant tax year. Good records make self-assessment easier and protect you if HMRC opens an enquiry.