Landlord Tax Guide: A Plain-English Guide for UK Property Owners

At a Glance

• Income tax is charged on rental profit — rent received minus allowable expenses
• Report rental properties on a Self Assessment tax return each year using the SA105 pages
• Register by 5 October after your first tax year of receiving rental income
• Mortgage interest: you get a 20% income tax credit (not a direct expense deduction)
• Keep financial records for at least 5 years after the 31 January filing deadline
• Making Tax Digital applies to landlords with gross property income over £50,000 from April 2026

What Counts as Rental Income?

Your taxable rental income includes more than just the monthly rent payments. HMRC counts almost everything a tenant pays you as rental income, including:

• Monthly rent payments
• Payments for repairs or maintenance that the tenant makes (even if you did not ask them to)
• Non-refundable deposits (refundable tenancy deposits held in a protection scheme do not count)
• Payments for the use of furniture or other items included in the letting
• Cleaning or gardening services paid by the tenant if these are part of the rental arrangement
• Any premiums paid for the grant of a lease

If you receive rental income, you must declare it to HMRC. There is no minimum threshold — even £1 of rental income is technically reportable. However, the £1,000 property allowance means you can earn up to £1,000 of property income per year tax-free without needing to report it.

If your property income is between £1,000 and £2,500, you can either use the property allowance or report the actual income and claim actual expenses. Above £2,500, you must register for Self Assessment and report everything.

Allowable Expenses

You can deduct ‘allowable expenses’ from your rental income before paying tax. These are costs that are wholly and exclusively for the purpose of letting the property. Common allowable expenses include:

Property maintenance and repairs: Fixing a broken boiler, repairing a leaking roof, repainting between tenancies, replacing broken windows. Note: improvements (like adding an extension) are not repairs — these are capital costs and are treated differently.

Replacement of domestic items: If you provide furnished accommodation, you can claim for replacing furnishings, appliances, and kitchenware on a like-for-like basis. This replaced the old ‘Wear and Tear’ allowance. You cannot claim for the original purchase, only replacements.

Professional fees: Letting agent fees, accountant fees, legal fees for tenancy agreements (but not for buying the property).

Insurance: Buildings insurance, contents insurance, rent guarantee insurance, public liability insurance.

Utilities and council tax: If you pay these (rather than the tenant), you can claim them. If the tenant pays them directly, they are not your expense.

Ground rent and service charges: For leasehold properties.

Cleaning and gardening: If you pay for these services between tenancies or during the tenancy.

Advertising: Costs to find tenants.

Telephone and stationery: For managing your properties.

Section 24: Mortgage Interest Tax Relief

This is the change that has caused the most confusion for landlords. Since April 2020, you can no longer deduct mortgage interest from your rental income as an expense. Instead, you receive a tax credit equal to 20% of your mortgage interest.

How it works in practice:

You receive £20,000 in rental income and pay £8,000 in mortgage interest. Your other allowable expenses are £3,000.

Under the old rules, your taxable profit would have been £20,000 - £8,000 - £3,000 = £9,000.

Under the new rules, your taxable profit is £20,000 - £3,000 = £17,000. You then pay tax on £17,000 and receive a 20% tax credit on the £8,000 mortgage interest (which is £1,600).

If you are a basic-rate taxpayer (20%), this makes no difference to your final tax bill. But if you are a higher-rate taxpayer (40%), the effect is significant. You are paying 40% tax on income that was previously sheltered by the mortgage interest deduction, and only getting 20% back.

Example for a higher-rate taxpayer: Tax on £17,000 at 40% = £6,800. Minus 20% credit on £8,000 = £1,600. Net tax = £5,200.

Under the old system: Tax on £9,000 at 40% = £3,600.

The Section 24 change costs this landlord an extra £1,600 in tax.

This is why many landlords have restructured into limited companies, where mortgage interest remains fully deductible as a business expense. But company ownership has its own complications and costs.

Keeping Records as a Landlord

Accurate records are the foundation of landlord accounting and your evidence if HMRC ever queries your return. Good records also mean you capture every allowable expense.

For every rent payment received, record:

• Date received
• Amount
• Tenant name
• Property address
• Rental period covered
• Method of payment

For every expense, record:

• Date paid
• Amount
• Supplier name
• Description of the work or item
• Which property it relates to
• Receipt or invoice (a phone photo is fine)

You should also keep:

• Bank statements from a dedicated rental account (strongly recommended)
• Tenancy agreements
• Letting agent statements
• Annual mortgage statements showing interest paid (needed for the Section 24 calculation)
• Insurance documents and safety certificates

Keep all financial records for at least five years after the 31 January filing deadline. For the 2025/26 tax year (return due 31 January 2027), keep records until at least January 2032.

HMRC can open an enquiry at any point within that window. Many landlords keep six years of records to be safe.

Multiple Rental Properties

HMRC treats all your UK rental properties as a single ‘property business’. This means you combine the income and expenses from all your properties into one set of figures on your tax return.

Practical implications:

• You file one set of SA105 Property pages covering all your UK properties
• Profits and losses across properties are netted together automatically
• You cannot choose to report some properties and not others
• If one property makes a loss and another makes a profit, the loss offsets the profit in the same year

Despite this combined treatment, keep separate records per property. This helps you:

• See which properties are profitable and which are not
• Prepare for Capital Gains Tax if you sell a property
• Respond to HMRC if they query a specific property
• Manage your portfolio effectively

Our Rental Property Tracker template is designed to track up to 5 properties separately while also producing the combined figures you need for your tax return.

Overseas properties are kept entirely separate. Their income and expenses cannot be combined with UK properties. They are reported on the SA106 (Foreign Income) pages instead.

Filing Your Tax Return

Rental income is reported on the SA105 (Property) supplementary pages of your Self Assessment return. If this is your first year of receiving rental income, register for Self Assessment by 5 October after the end of that tax year.

The SA105 asks for:

• Total rental income from all properties
• Allowable expenses by category
• Mortgage interest paid (used for the Section 24 tax credit calculation)
• Any losses brought forward from previous years
• Property income allowance (if applicable)

HMRC’s online system calculates your tax liability automatically as you enter figures.

Important deadlines: