If you’re renting out a property, you need to pay tax on the income. But how exactly does it work, and when do you pay? Here’s a straightforward explanation of how landlords pay tax in the UK.
It’s Income Tax, Not a Special “Landlord Tax”
Rental income is taxed as part of your overall income. It gets added to any salary, pension, or self-employed earnings you have, and you pay income tax on the total at your normal rate.
The current income tax bands (2025/26) are:
- £0 – £12,570: Personal allowance (0%)
- £12,571 – £50,270: Basic rate (20%)
- £50,271 – £125,140: Higher rate (40%)
- Over £125,140: Additional rate (45%)
So if you earn £40,000 from your job and £10,000 in rental profit, you’re taxed on £50,000 total. Some of that rental income will be taxed at 20%, and some may push into the 40% band.
You’re Taxed on Profit, Not Rent
The good news: you don’t pay tax on every pound of rent you receive. You’re taxed on your rental profit — that’s your rental income minus allowable expenses.
Allowable expenses include things like letting agent fees, insurance, repairs, ground rent, and accountancy costs. The more legitimate expenses you have, the less tax you pay.
For example, if you receive £12,000 in rent but have £3,000 in allowable expenses, you’re taxed on £9,000 — not £12,000.
What About Mortgage Interest?
This is where it gets slightly complicated. Since April 2020, landlords can no longer deduct mortgage interest as an expense. Instead, you get a 20% tax credit on your interest payments.
This means if you pay £5,000 in mortgage interest, you get £1,000 off your tax bill — regardless of whether you’re a basic or higher rate taxpayer. For higher-rate taxpayers, this change (known as Section 24) can significantly increase the tax owed.
How Do You Actually Pay?
Landlords pay tax through Self Assessment. This means:
- Register with HMRC as a landlord (if you haven’t already)
- File a Self Assessment tax return each year, reporting your rental income and expenses
- Pay what you owe by the deadline
The tax year runs from 6 April to 5 April. Your tax return for the 2025/26 tax year is due by 31 January 2027, and that’s also when you pay the tax.
Payments on Account
If your tax bill is over £1,000, HMRC will ask for “payments on account” — advance payments towards next year’s bill. You’ll pay 50% in January and 50% in July.
This catches many new landlords off guard. In your first year, you might pay 18 months’ worth of tax in one go: the full bill for year one, plus half of year two upfront.
Do Landlords Pay National Insurance?
Usually, no. Rental income isn’t subject to National Insurance because it’s considered investment income, not earnings from a trade. However, if HMRC considers your property activities to be a business (rare, but possible for large portfolios), NI could apply.
What About Multiple Properties?
If you own several rental properties, you combine all the income and expenses into one “property business” for tax purposes. You can’t file separately for each property — it all goes on one Self Assessment return.
The Key Deadlines
- 5 October: Register for Self Assessment if you’re a new landlord
- 31 January: File your return and pay your tax bill
- 31 July: Second payment on account (if applicable)
Miss these and you’ll face penalties and interest charges.
Tax rules change regularly. Check GOV.UK for current rates or speak to an accountant about your specific situation.