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🇬🇧 UK Landlords · 2026 Rules · Free

Rental Income Tax Calculator 2026

Calculate exactly how much tax you owe on your buy-to-let properties. Fully models the Section 24 mortgage rules and projects the impact of the 2027 rate hikes.

✓Section 24 Logic✓2027 Rate Warning✓Allowable Expenses✓Free — no sign-up

Property Details (Annual)

Repairs, letting agent fees, insurance. Do NOT include mortgage interest here.

Due to Section 24 rules, this is no longer a deductible expense. You receive a 20% tax credit instead.

Your PAYE salary or other income. This determines your tax bracket for the rental income.

Final Tax Owed (2026/27)

£0.00

Net Cash Profit: £0.00

Section 24 Tax Breakdown:

Taxable Profit (Rent - Expenses):£0.00
Gross Tax (20%/40%/45%):£0.00
Section 24 Credit (20% of Interest):- £0.00
Final Tax Bill:£0.00
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How Is Rental Income Taxed in 2026?

Any profit you make from renting out property in the UK is taxable. It is simply added to your other earnings (such as your salary) and taxed at your marginal Income Tax rate (20%, 40%, or 45%). If your rental income pushes you into a higher tax bracket, you will pay the higher rate on that portion of the profit. If you trigger a large tax bill, you will likely fall into the Payments on Account system. You can forecast this using our Payment on Account Calculator.

Section 24 — Why You Can't Deduct Mortgage Interest

Before 2017, landlords could deduct their mortgage interest payments as a business expense, meaning they were only taxed on their true commercial profit. This is no longer the case due to the controversial Section 24 rules.

Today, you are heavily taxed on your revenue, not your profit. You cannot deduct mortgage interest from your rental income. Instead, HMRC taxes your total rental revenue, and then grants you a basic 20% tax credit to partially offset your mortgage costs.

How Section 24 Hits Higher Rate Landlords Hardest

Section 24 is devastating for higher-rate (40%) taxpayers. Because they are taxed at 40% on their rental revenue but only receive a 20% credit for their mortgage costs, they effectively pay tax on money they never kept. As our calculator demonstrates, it is very common for a higher-rate landlord to operate at a true commercial loss, yet still owe HMRC thousands of pounds in tax. This is why many landlords are moving properties into limited companies, though they must then consider Dividend Tax when extracting profits.

2027 Warning — Rental Income Tax Rates Are Increasing

The government has announced that starting in the 2027/28 tax year, property income tax rates will increase across the board to 22%, 42%, and 47%. This will make the Section 24 trap even worse, because while the tax you owe increases to 42%, the mortgage interest credit you receive remains locked at 20%. Our calculator projects exactly what your bill will look like when these hikes take effect.

Allowable Expenses You Can Deduct

While mortgage interest is excluded, you can still deduct day-to-day running costs. These are known as allowable expenses, and include:

  • Letting agents' fees and property management costs
  • Landlord insurance policies
  • Maintenance and repairs (e.g., fixing a broken boiler, but not upgrading to a better one)
  • Utility bills (gas, water, electricity) if you pay them
  • Council Tax (only for periods when the property is empty)

Rent-a-Room Relief — £7,500 Tax-Free

If you do not own a separate buy-to-let property, but instead rent out a furnished room within your own main residence (your home), you qualify for the Rent-a-Room scheme. This allows you to earn up to £7,500 per year completely tax-free. If you earn over this amount, you only pay tax on the excess. If you eventually sell a buy-to-let property, do not forget you will owe Capital Gains Tax—calculate this using our CGT Calculator.

Property Tax

Frequently asked questions

How much tax do I pay on rental income in 2026?
Your rental profit is added to your other income (like your salary) and taxed at your marginal rate. For 2026, this is 20% for basic rate taxpayers, 40% for higher rate taxpayers, and 45% for additional rate taxpayers.
Can I deduct mortgage interest from rental income in 2026?
No. Due to Section 24 rules, you can no longer deduct mortgage interest as an allowable expense to calculate your profit. Instead, you calculate your tax bill on your gross profit, and then claim a 20% tax credit on your mortgage interest costs.
What is Section 24 and how does it affect landlords?
Section 24 is a tax rule that prevents landlords from deducting finance costs (like mortgage interest) from their rental income. It heavily penalizes higher-rate taxpayers, as they are taxed at 40% on their revenue, but only receive a 20% credit back for their mortgage costs. In some cases, landlords can actually make a commercial loss but still owe thousands in tax.
What expenses can I offset against rental income?
You can deduct 'allowable expenses' which are costs wholly and exclusively for the purposes of renting out the property. This includes letting agent fees, landlord insurance, maintenance and repairs (but not improvements), utility bills, and ground rent.
Do I need to declare rental income on Self Assessment?
Yes. If your rental income is between £1,000 and £2,500 a year, you must contact HMRC. If your rental income is £2,500 to £9,999 after allowable expenses, or £10,000 or more before allowable expenses, you must register for Self Assessment and file a tax return.
Are rental income tax rates increasing in 2027?
Yes. The government has announced that starting in the 2027/28 tax year, the tax rates on property income will increase by 2 percentage points, bringing the rates to 22%, 42%, and 47%. The Section 24 mortgage credit will remain locked at 20%.
What is the property income allowance?
The property income allowance is a £1,000 tax-free allowance for property income. If your gross rental income is £1,000 or less, you don't have to tell HMRC or pay any tax. If it's higher, you can choose to deduct this £1,000 instead of calculating your actual allowable expenses.
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