How to pay tax on rental income

If you live in the UK and have rental income, you’ll usually have to pay tax on it.

You do this by filing a Self Assessment tax return – TaxScouts can help you do it 100% online.

How much rental income tax will I have to pay?

How to calculate what you will pay tax on:

1. Figure out which allowable expenses or allowances you want to claim
2. Deduct those from your total rental income
3. This is your rental profit – add it to your other income (wages, etc.) to figure out what your total income for the year was
4. Based on this you’ll know what tax band you’re in
5. You’ll pay tax on rental profits at the tax rate corresponding to your tax band

Here are the tax bands and tax rates in the UK in the 2024/25 tax year.

What if I also live on the property?

Then you can be eligible for the Rent-a-Room Scheme – probably the best tax-free allowance for landlords:

• 0% tax on the first £7,500 you make from rent
• You don’t even need to submit a Self Assessment tax return if you earn under this
• If you host on Airbnb or other platforms, you can also use it

What if it’s a buy-to-let or second home?

Then HMRC will ask you to treat it as a business:

• You can’t claim the Rent-A-Room Scheme
• You can claim tax relief on your mortgage interest
• And you can also claim your rental expenses in the usual way

What expenses and allowances can I claim?

You can claim pretty much everything related to running your property and being a good landlord:

• Letting agents’ fees, accountants’ fees (incl. TaxScouts), or legal fees
• Rent, ground rent, and service charges (like cleaning)
• Gas, electricity, water, and other utilities.

There are also quite a few allowances you can use:

• The Personal Allowance: if your total income (rent + other sources) is under £12,570, then you don’t need to do anything – it’s tax-free
• The Marriage Allowance: can be worth another £250
• The Rent-A-Room Scheme: if you also live on the property, then you can claim a flat £7,500 tax-free allowance
• The Property Income Allowance: you should use it if you don’t live on the property or you didn’t have big expenses. It’s a flat £1,000

Can I claim my mortgage payments as an expense?

It’s a bit complicated, but yes:

• You can only claim your mortgage interest
• This is gradually being replaced with a flat 20% tax credit
• These changes won’t really impact you unless your total income is around £50,270 – check out some example calculations here

What if I own it jointly with my partner?

• If you’re not married, your share of the rental profits will be based on the share of the property you actually own.
• If you’re married or in a civil partnership, then you will have to split the profits, expenses, and most of the allowances (except the personal allowance and the property income allowance) 50/50. You could also benefit from the Marriage Allowance

Read more in our guide to paying rent from jointly owned properties.

What if it’s a property abroad?

Most of the time, you’ll pay tax on the rental income just as if it was based in the UK – read more on our guide to paying UK tax on foreign income here.

Do I need to do a Self Assessment tax return?

• No, if your rental income is under £1,000 and you don’t have another reason to file a tax return
• Yes, if you’re a buy-to-let landlord and you earn more than £1,000 from rent
• Yes, if you rent out a room in your house and you earn more than £7,500 in rent

Are there any other taxes?

Yes, but you won’t have to pay them every year:

• When you’re buying a property, you’ll have to pay Stamp Duty – check out our Stamp Duty calculator 👇

• When you’re selling your property, you’ll have to pay Capital Gains Tax on that profit (if any). You might also have to pay CGT if you’re giving the property as a gift
• After you pass away, your heirs might also have to pay Inheritance Tax

You can read more details about all these taxes here.