Rental Income Tax Calculator

How rental income tax works

As a landlord you are taxed on your rental profit, which is your rent minus your allowable expenses. That profit is added to your salary and any other income, then taxed at your marginal rate. For 2026-27 that is 20% while your total income is under £50,270, 40% up to £125,140, and 45% above that. Because the profit sits on top of your other income, a job that already fills the basic-rate band pushes your rental profit into the 40% bracket. There is no separate personal allowance for property: the same £12,570 has to cover everything you earn.

Mortgage interest and Section 24

This is the rule most landlords get wrong. Since April 2020, mortgage interest is no longer an allowable expense. You cannot take it off your profit. Instead you get a 20% tax credit on the interest, applied after the tax on your profit is worked out. For a basic-rate landlord that credit matches the 20% they would have saved by deducting it, so nothing changes. For a higher-rate landlord it does not: the profit is taxed at 40% while the relief is stuck at 20%, so the same mortgage now costs more in tax. That gap is why plenty of higher-rate landlords pay tax on paper profits that are far bigger than the cash they take home. The calculator above shows both figures so you can see it.

Allowable expenses and the £1,000 property allowance

The expenses you can deduct are the day-to-day running costs of letting: repairs and maintenance, letting agent and management fees, landlord insurance, ground rent and service charges, council tax and utility bills where you pay them, and accountancy fees. Improvements that add value, such as an extension, are not deductible against income but may reduce capital gains tax when you sell. If your total expenses come to less than £1,000, you can claim the flat £1,000 property allowance instead, and if your rental income is £1,000 or less you do not need to report it to HMRC at all.

A higher-rate landlord example

Take £15,000 of rent, £3,000 of expenses, £6,000 of mortgage interest and a £60,000 salary. Your taxable profit is £12,000, because interest is not deducted. That £12,000 sits entirely in the higher-rate band, so the tax on it is 40%, or £4,800. The mortgage interest credit is 20% of £6,000, which is £1,200, giving a final tax bill of £3,600. Your actual cash profit is only £6,000 once you pay the interest, so a £3,600 bill is an effective 60% of the money you made. Under the old rules you would have deducted the interest and paid noticeably less. This is Section 24 in a single example.

Landlord tax calculator

Use this as your landlord tax calculator whether you let one flat or a portfolio. Enter the rent, your allowable expenses, the mortgage interest and your other income, and it works the profit through the 2026-27 bands and the Section 24 credit the way HMRC does. The number that trips most landlords up is the one where your rental profit stacks on top of your salary. A £45,000 salary leaves only £5,270 of basic-rate band, so most of an £8,000 rental profit is taxed at 40%, not 20%. The calculator handles that stacking for you rather than assuming a flat rate on the profit.

Buy-to-let tax calculator

For a mortgaged rental, a plain profit sum understates the bill, which is why a proper buy-to-let tax calculator treats the interest separately. On a buy-to-let, the interest is added back before tax and then relieved at a flat 20%, so a higher-rate landlord pays 40% on the profit and claws back only 20% of the interest. On £12,000 of profit with £6,000 of interest, that is £4,800 of tax less a £1,200 credit, leaving £3,600. The tool shows the tax bill and the cash you keep side by side, so you can see the gap Section 24 opens up on a geared property.

Frequently asked questions