Landlord Tax Calculator UK

A landlord tax calculator estimates the income tax due on your rental profit for the year. For individual landlords, the key complication is Section 24, which restricts mortgage interest relief to a 20% tax credit rather than letting you deduct it as an expense. That single rule is why two landlords with the same rent and the same mortgage can end up with very different tax bills, depending on whether they are basic-rate or higher-rate taxpayers.

This guide explains how rental profit is taxed, walks through the Section 24 calculation step by step, and gives worked examples at both tax rates.

Try our free landlord tax calculator for an illustrative Section 24 estimate (not tax advice).

How rental profits are taxed

Rental income from UK property is taxed as property income, added to your other income for the tax year (6 April to 5 April) and taxed at your marginal rate once your personal allowance and any reliefs are applied. The basic mechanics:

1. Add up all rental income received in the tax year.
2. Deduct allowable expenses - things wholly and exclusively for the letting business. Common categories include letting agent and management fees, landlord insurance, service charges and ground rent on leasehold flats, repairs and maintenance (replacing a broken boiler counts; upgrading it to a much larger, better system typically counts as a capital improvement instead), accountancy fees, and compliance costs such as gas safety certificates, EICR reports and EPC assessments. Costs for improving the property beyond its original condition, rather than repairing it, are usually capital in nature and are dealt with separately, often through capital gains tax when the property is eventually sold.
3. The result is your property profit.
4. Add this profit to your other income (employment, self-employment, pensions) to work out your total taxable income and which tax bands you fall into.

For 2026/27, the main UK income tax bands (England, Wales and Northern Ireland) are:

Scotland has separate income tax bands and rates, so Scottish taxpayers should check the equivalent Scottish rates on GOV.UK rather than using the England, Wales and Northern Ireland figures above. These thresholds are set to stay frozen until April 2031, so fiscal drag (more of your income being pulled into higher bands as wages rise) will keep affecting landlords over the next few years even without any rate change.

Mortgage interest is where property income tax differs sharply from most other business income, because of Section 24.

Section 24 in the calculation

Since April 2020, individual landlords have not been able to deduct mortgage interest (or other finance costs) as an expense before arriving at their taxable profit. Instead:

1. Rental profit is calculated before deducting finance costs, so your taxable profit is higher than your true cash profit.
2. You then get a tax credit worth 20% of your finance costs, applied after your tax bill is calculated.

This matters because a 20% credit is worth the same in cash terms to every landlord, but the tax saved by deducting an expense outright depends on your marginal rate. For a higher-rate taxpayer, being restricted to a 20% credit rather than 40% relief roughly doubles the effective tax cost of every pound of mortgage interest. It can also push a landlord's taxable income into a higher band than their true cash profit would suggest, because the finance cost is added back before the bands are applied.

Section 24 does not apply to:

• Furnished holiday lets (which have their own tax treatment)
• Landlords who own property through a limited company, which pays corporation tax on profits and can still deduct interest as a normal business expense

That is one of the main reasons landlords weigh up incorporating a portfolio, though it is not automatically the right move for everyone - see our guide on tax on rental income in the UK for a fuller comparison, and our Section 24 explainer for more detail on how the credit is calculated.

Basic vs higher rate

The practical effect of Section 24 is easiest to see side by side.

Basic-rate taxpayer

• Rental profit before finance costs: £9,000
• Finance costs (mortgage interest): £3,000
• Taxable property profit: £9,000 (finance costs added back)
• Tax at 20%: £1,800
• Less 20% finance cost credit (20% x £3,000): £600
• Tax due: £1,200
• True cash profit after interest: £6,000, so the effective tax rate on cash profit is 20%

Higher-rate taxpayer

• Rental profit before finance costs: £9,000
• Finance costs (mortgage interest): £3,000
• Taxable property profit: £9,000
• Tax at 40%: £3,600
• Less 20% finance cost credit (20% x £3,000): £600
• Tax due: £3,000
• True cash profit after interest: £6,000, so the effective tax rate on cash profit is 50%

Same rent, same mortgage, same cash profit of £6,000 - but the higher-rate taxpayer pays £3,000 in tax against £1,200 for the basic-rate taxpayer, and their effective rate on the actual cash they keep is 50% rather than 20%. This is the calculation that drives most of the conversation around incorporation for higher-rate taxpayers with large mortgages.

Examples

Example: a landlord close to the higher-rate threshold

A landlord earns £46,000 from employment and £9,000 in net property profit before finance costs, with £4,000 in mortgage interest.

• Total taxable income before property: £46,000
• Property profit added (before finance costs, per Section 24): £9,000
• Total taxable income: £55,000
• This pushes £4,730 of income into the 40% higher-rate band (income above the £50,270 threshold), even though their actual employment income alone would have kept them just inside the basic rate.
• The finance cost credit (20% x £4,000 = £800) is deducted from the total tax bill, but it does not stop the extra rental profit from tipping some of their income into the higher band.

This is a common trap: adding back finance costs before applying the tax bands can push landlords with modest actual cash profit into a higher tax band than they expect, even if their true rental cash flow is unchanged from the year before.

Example: additional-rate taxpayer with several mortgaged properties

A landlord with total taxable income (including rental profit before finance costs) of £150,000 falls into the additional rate band above £125,140, and loses their personal allowance entirely because it tapers to zero once income passes that same threshold. With property profit before finance costs of £40,000 and finance costs of £18,000 across a small portfolio, the finance cost credit is worth 20% x £18,000 = £3,600 against a tax bill calculated at 45% on the top slice of income. The gap between the 45% rate applied to the added-back profit and the fixed 20% credit is even wider than in the higher-rate example above, which is why larger, more geared portfolios held in personal names are the group most likely to benefit from reviewing whether a limited company structure would suit them better going forward. That said, moving an existing portfolio into a company can trigger stamp duty land tax and capital gains tax on the transfer, so it is rarely as simple as it first looks and needs advice specific to your own portfolio.

Example: allowable expenses reducing the bill

A landlord with £14,400 annual rent can deduct letting agent fees (£1,440), insurance (£220), repairs (£650), gas safety and EICR costs (£140) and ground rent (£300) before arriving at profit before finance costs of £11,650. Keeping clear records of every allowable expense, rather than estimating at year end, is often the easiest way to reduce a tax bill without doing anything more aggressive than accurate bookkeeping. Our landlord allowable expenses guide has a fuller list of what you can and cannot deduct.

Record-keeping for Making Tax Digital

Making Tax Digital for Income Tax is being phased in for sole traders and landlords above set income thresholds, requiring digital records and quarterly updates to HMRC rather than a single annual Self Assessment entry. Whatever your current threshold and start date, the practical groundwork is the same:

• Keep digital records of rental income and every allowable expense, ideally as transactions happen rather than reconstructed at year end.
• Reconcile bank statements against your property accounts regularly, so nothing is missed or double-counted.
• Keep evidence (invoices, certificates, contractor receipts) for at least the statutory retention period, in case HMRC asks questions.
• Separate personal and property banking wherever possible, even for a single property, to make the records easier to audit.

Because thresholds and start dates for Making Tax Digital have changed more than once, check the current position on GOV.UK before assuming which category you fall into. Property HQ connects to your bank accounts via Open Banking and automatically categorises rent and property costs, so your records stay current throughout the year rather than being rebuilt from paper receipts every January.

Disclaimer

This guide is general information for UK landlords, not tax advice. Tax rules, rates and thresholds change - check current guidance on GOV.UK or speak to a qualified accountant for your own situation.