How to pay tax on rental income

We've updated this guide on 24th July 2019

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.

In case you don’t know what are the tax bands and tax rates in the UK:

Income Tax rate
Up to £12,500 0% Personal allowance
£12,501 to £50,000 20% Basic rate
£50,000 to £150,000 40% Higher rate
over £150,000 45% Additional rate

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:

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

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

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:

Can I claim my mortgage payments as an expense?

It’s a bit complicated, but yes:

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?

Are there any other taxes?

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

You can read more details about all these taxes here.

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